Welcome to the AFS Conference 2015 Schedule App. Please use the search features to see when your session or poster has been scheduled to take place.
Option Writing Equivalence of Rebalancing
Keywords: 5 words maximum
rebalancing, portfolio choice, asset allocation
Very short description for use in the program to help attendees understand more than a title can describe
Normal market action moves a portfolio asset allocation from the pre- ferred target weights and risk profile. Systematic rebalancing maintains the desired original risk exposures. A program of rebalancing can be seen as pre-committing to selling the outperforming asset(s) in order to buy the underperforming asset(s). This is functionally equivalent to writing the appropriate combination of options (call options on the outperforming asset(s) and put options on the underperforming asset(s)). We investigate this equivalence of option writing with rebalancing.
Lead & Corresponding Author
William W Jennings, PhD CFA CGMA, USAF Academy
Job Title
Professor of Finance and Investments
Additional Authors
Brian C Payne, USAF Academy
Job Title
Associate Professor of Management