🙅Hedge Risk Mitigation

Speculate on pegged assets, multifold your earning

This section considers the influence of trading fees on risk-neutral pricing, denoted by the symbol.

Using $\phi_k$to represent the portion of the hedge acquired for a specific strike in a particular epoch, the return from "selling" it can be expressed as:

$$APR_k=12\times\left(\frac{1-c}{1-\phi_k}\right),$$

In order to maintain a no-arbitrage environment, the following relationship must hold:

$$P_k=\frac{\phi_k}{1-c}.$$

Please note that while the Annual Percentage Rate (APR) for selling a hedge may appear to be relatively high, there is always a probability $P_k$ that the seller's entire position could be liquidated.