MSc Computer Science Thesis Talk
Speaker: Rishi Garg, CMI
Date: Friday, 12 April 2024
Time: 10:30 to 11:30 AM
Venue: Seminar Hall, CMI
Bayesian Portfolio Optimization for Option Writers
Rishi Garg
Chennai Mathematical Institute.
12-04-24

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Abstract

Since an option is a zero-sum game, the option buyer is exposed to limited risk with unlimited profit potential while the option writer typically faces unlimited risk, with the limited maximum gain. To avoid default, regulators typically require option writers to deposit huge collateral as margin requirements. We'll discuss the margin requirement calculation method used by Indian exchanges and the Bayesian Optimization algorithm to derive the optimal portfolio of options for writers that minimizes the margin requirement and delta of the portfolio for a given expected premium. We'll present the empirical results for NIFTY options.