Limits of Arbitrage and Primary Risk-Taking in Derivative Securities
量化了美国股票期权delta对冲的方差缩减比例，提出自上而下的收益归因框架识别剩余风险来源，并构建统计因子模型解释delta对冲期权收益的变动。
Abstract Classic option pricing theory values a derivative contract via dynamic delta hedging and treating the contract as redundant relative to the underlying security. Dynamic delta hedging proves highly effective in practice, but the remaining risk is still large because of the practical limits of arbitrage. Derivatives can play primary roles in risk allocation. This paper quantifies the percentage variance reduction of delta hedging on U.S. stock options, proposes a top-down return attribution framework to identify the remaining risk sources of the delta-hedged option investment, and constructs a statistical return factor model to explain the variations of the delta-hedged option returns.