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Pricing and Hedging Index Options with a Dominant Constituent Stock

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Figure

Figure 2.1: The parameters and the first four moments of a sum of n lognormally distributed,ρ correlated, random variables
Figure 2.2: The parameters and the first four moments of a sum of n lognormally distributed, ρcorrelated, random variables
Figure 2.3: QQ plot of the stock returns on XEG’s top ten stocks and the whole index againstthe normal distribution, Jan 1, 2010 to Feb 28, 2012, daily frequency.
Figure 2.4: QQ plot of the stock returns on the sum of XEG’s top n = 2, 3, ..., 10 stocks againstthe normal distribution, Jan 1, 2010 to Feb 28, 2012, daily frequency.
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