Abstract
The automotive firms (usually SMEs) work as suppliers for a big automaker, so the former have financial dependence on the latter’s structure. Each of these SMEs, working as supplier for a brand, is likely to find its sales falling or its gross margin shrinking when a depreciation occurs in the automaker’s stock price. Therefore, fluctuation in automaker’s stock price can impact negatively in its suppliers. This paper uses a stochastic model to calculate the premium that the SME must pay for hedge against these losses. Mathematically, it calculates the probability at time cero of automaker’s stock price hitting a specific barrier before the option expires. For these purposes, 2014 intraday quotes have been used.
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© 2015 Springer International Publishing Switzerland
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García-Fronti, JI., Romina-Sánchez, J. (2015). Hedge for Automotive SMEs Using An Exotic Option. In: Gil-Aluja, J., Terceño-Gómez, A., Ferrer-Comalat, J., Merigó-Lindahl, J., Linares-Mustarós, S. (eds) Scientific Methods for the Treatment of Uncertainty in Social Sciences. Advances in Intelligent Systems and Computing, vol 377. Springer, Cham. https://doi.org/10.1007/978-3-319-19704-3_30
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DOI: https://doi.org/10.1007/978-3-319-19704-3_30
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Publisher Name: Springer, Cham
Print ISBN: 978-3-319-19703-6
Online ISBN: 978-3-319-19704-3
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