The Trend is Your Friend: Absence of Pin Risk in Trend Options and Time Diversification

9 Pages Posted: 9 Sep 2005

See all articles by Markus Leippold

Markus Leippold

University of Zurich; Swiss Finance Institute

Juerg M. Syz

Diener Syz Real Estate; University of Zurich

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 We describe the properties of trend options and show how the pin risk of these contracts is withdrawn.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

Leippold, Markus and Syz, Juerg M., The Trend is Your Friend: Absence of Pin Risk in Trend Options and Time Diversification (June 2005). Available at SSRN: https://ssrn.com/abstract=796070 or http://dx.doi.org/10.2139/ssrn.796070

Markus Leippold (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Juerg M. Syz

Diener Syz Real Estate ( email )

Dufourstrasse 21
Zollikon, 8702
Switzerland

University of Zurich

Rämistrasse 71
Zürich, CH-8006
Switzerland