A New Approach to Determine Optimized Stock Insurance Contract in Tehran Stock Exchange | ||
| پژوهشنامه اقتصادی | ||
| Article 6, Volume 19, Issue 72 - Serial Number 1, April 2019, Pages 185-204 PDF (656.03 K) | ||
| Document Type: Research Paper | ||
| DOI: 10.22054/joer.2019.10158 | ||
| Authors | ||
| Mohammad Bamani Moghadam1; mostafa pouralizadeh* 2; Hadi Esmaeilpour Moghadam3 | ||
| 1Assistant Professor, Department of Statistics, Faculty of Mathematics and Computer Science, Allameh Tabataba’i University,Tehran | ||
| 2PhD Student in Statistics, Faculty of Mathematics and Computer Science, Allameh Tabataba’i University,Tehran | ||
| 3PhD Student in Financial Economics, Faculty of Economics, Allameh Tabataba’i University,Tehran | ||
| Abstract | ||
| The purpose of this study is to determine an optimized stock insurance contract in Tehran Stock Exchange. First of all, based on a financial management problem, a risk management contract is designed to minimize the risk of loss that an agent might face. Then, with a mathematical modeling, we will see that to efficiently manage the stock risk, we need to make sure that only multi-layer contracts, or equivalently, European call options are correctly valued. Therefore, the optimized insurance contract is determined by correct pricing of European call options. Studying more deeply in this area by implementing the proposed algorithm on Tehran stock exchange shows that the optimized value of the insurance contract is a small percentage of the stock initial price; furthermore, it is also a function of the stock return fluctuation. Hence, the volatility and the price of insurance contract are positively correlated. In other words, the more a stock is volatile, the more expensive is an insurance contract. | ||
| Keywords | ||
| Insurance Contract; Stock; Risk Management | ||
| References | ||
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