Measurement and Evaluation of the Hedging portfolio using the Fair Theoretical Value of Call Options for a sample of Banks listed on the Iraq Stock Exchange

Authors

  • Bassam Ahmed Abdullah College of Administration and Economics, Banking and Financial Sciences, University of Duhok, Duhok , Kurdistan, Iraq

DOI:

https://doi.org/10.25007/ajnu.v13n1a728

Abstract

The study Focused on Measuring and Evaluating the Risk Hedging Portfolio using the fair Theoretical value pricing of Call options for a Sample of Banks listed on the Iraq Stock Exchange. Given what these options represent as Methods for managing risks resulting from investment transactions in stock, through what it expresses from reading the financial phenomenon from Achieving stability in the returns and risks of investing in stocks. So the study sought to provide an Experimental guide to price the value of Call options according to a binomial Model, and to build tests to clarify how to measure the Hedging Portfolio based on the theoretical studies proposals in this field. In order to test the research hypothesis, the Call options were priced for a random sample consisting of 16 banks listed on the Iraq Stock Exchange for the period from the beginning of 2019 until mid-2020 using daily stock prices, and in line with that the study indicated a test to evaluate a Hedge Portfolio of risks through pricing Call options. In detail, the Call options were priced as the link linking changes in the value of the portfolio and the available opportunities for arbitrage, and the study concluded that building a hedge portfolio based on the outputs of the fair value pricing of options contributes to reducing investment risks that facing the investment portfolio that is surrounded by the banking sector. The study suggests Given the price of the sale or purchase of a particular option in the financial market, the essence of the entire investment process, as it reflects the summary of the interaction of a group of different elements, including the Exercise Price and the duration of the contract, making use of these options for all parties involved in the financial market as an indication of an information nature It expresses an honest expression of the fair value of the factors affecting the option price or value and, accordingly, the share price.

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References

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Published

2024-03-31

How to Cite

Ahmed Abdullah, B. . (2024). Measurement and Evaluation of the Hedging portfolio using the Fair Theoretical Value of Call Options for a sample of Banks listed on the Iraq Stock Exchange. Academic Journal of Nawroz University, 13(1), 1047–1065. https://doi.org/10.25007/ajnu.v13n1a728

Issue

Vol. 13 No. 1 (2024)

Section

Articles

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