The Trend is Your Friend: Absence of Pin Risk in Trend Options and Time Diversification
9 Pages Posted: 9 Sep 2005
Date Written: June 2005
Abstract
Options whose payoff are linked to the trend of an underlying rather than to the underlying itself have many advantages, both for investors and hedgers. We describe the properties of trend options and show how the pin risk of these contracts is withdrawn.
Keywords: Time Diversification, Regression, PIN Risk
JEL Classification: G130
Suggested Citation: Suggested Citation
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