# Haghani-Ragulin-White about options



## general points 

- a) Do Options Belong in the Portfolios of Individual Investors?

It would be good to review how options are good for some market participants.
Do options belong in the portfolios of institutional investors? corporates?
Banks are intermmediating, but they also use options for various purposes.

- b) a question - how to measure a Vega exposure of an investor?

If an investor has mismatch between his exposure to volatility, he might use options to adjust/hedge to the targeted Vega sensitivity

- c) a question - risk can be measured as volatility or as tail risk/VAR. Perhaps, options can be useful for investors differentiating between different types of risk. 

In particular, some investors can be ready to pay some premium for the protection against tail risk.

- d) some investors can have structural exposures which require options

Pensioners should reallocate from equity more towards Treasuries and bonds.
Can downside puts (at low implied vol, for instance) be better than Treasuries in some situations?


Or can pensioners sell upside call spreads or buy covered calls for the sake of additional steady returns/carry?


- e) not sufficiently discussed - the differences in utility and risk profiles/incentives among different investors - how general are the conclusions, which seem to be analyzed ONLY for individual investors?

check [Bhansali book](https://knowen.org/nodes/854)
for professional use of options which might also be structurally useful for individual investors

## specific remarks

- Kelly criterion for options - is it simply log-utility?

Kelly-Thorp calculation is different, perhaps in the presence of non-linearities of options this calculation might or might not always lead to log-utility as in the case of linear asset???

also not necessarily very-large number of bets limit in practice?

-  **what is the motivation for the paper? Purely academic?**

volatility asset class & complex assets/strategies - what value for the markets? value for the individual investors?

- interesting results for leverage 150perc - to be discussed

## is the options an asset class?

the same question is being discussed for FX and for Commodities as linear assets. These questions are not settled explicitly for 20-30 years despite
various ETFs and specialised investors

My answer is that all these - options, FX, and commodities - are asset classes but for narrower and specialised investor types, perhaps,
excluding retail and HNW investors. An investor must have a certain edge, at least, in separating good wealth advisors!

Investing is a complex topic, rather like education, not as three types of salt in a supermarket.



# Parents

* Non-linearity and Convexity in Finance