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Hedge for Automotive SMEs Using An Exotic Option

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Scientific Methods for the Treatment of Uncertainty in Social Sciences

Part of the book series: Advances in Intelligent Systems and Computing ((AISC,volume 377))

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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References

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Author information

Authors and Affiliations

  1. Facultad de Ciencias Económicas, Universidad de Buenos Aires. Av, Córdoba 2122, Buenos Aires, Argentina

    Javier-Ignacio García-Fronti & Julieta Romina-Sánchez

Authors
  1. Javier-Ignacio García-Fronti
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  2. Julieta Romina-Sánchez
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Corresponding author

Correspondence to Javier-Ignacio García-Fronti .

Editor information

Editors and Affiliations

  1. Royal Academy of Economic and Financial Sciences (RACEF), Barcelona, Spain

    Jaime Gil-Aluja

  2. Department of Business Management, Universitat Rovira i Virgili Faculty of Business and Economics, Reus, Spain

    Antonio Terceño-Gómez

  3. Department of Business Administration, University of Girona, Girona, Spain

    Joan Carles Ferrer-Comalat

  4. Department of Management Control and Information Systems, University of Chile, Santiago, Chile

    José M. Merigó-Lindahl

  5. Department of Business Administration, University of Girona, Girona, Spain

    Salvador Linares-Mustarós

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© 2015 Springer International Publishing Switzerland

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Cite this paper

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

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-19703-6

  • Online ISBN: 978-3-319-19704-3

  • eBook Packages: EngineeringEngineering (R0)

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