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Article

Performance Attribution of Options: Defining Single-Stock Option Exposures and Understanding the Brinson-Fachler Effects

Stuart Morgan
The Journal of Portfolio Management Winter 2014, 40 (2) 103-111; DOI: https://doi.org/10.3905/jpm.2014.40.2.103
Stuart Morgan
is an analyst at Wingate Asset Management in Melbourne, Australia.
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  • For correspondence: stuart.morgan@wingategroup.com.au
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Abstract

There are two well-known methods to calculate the exposure of a single-stock option and the resulting return in order to undertake performance attribution of a portfolio. I discuss these two methods and introduce a third method to calculate exposure for attribution purposes which is both elegant and simple to calculate. I also discuss the resulting Brinson-Fachler attribution effects and how they should be used by a performance analyst for a portfolio which contains equities, options and cash. I conclude that a performance analyst should look at multiple aggregations in order to get a complete picture of a portfolio manager’s effectiveness. The results can easily be extended to portfolios which use different options strategies than the ones discussed.

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The Journal of Portfolio Management: 40 (2)
The Journal of Portfolio Management
Vol. 40, Issue 2
Winter 2014
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Performance Attribution of Options: Defining Single-Stock Option Exposures and Understanding the Brinson-Fachler Effects
Stuart Morgan
The Journal of Portfolio Management Jan 2014, 40 (2) 103-111; DOI: 10.3905/jpm.2014.40.2.103

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Performance Attribution of Options: Defining Single-Stock Option Exposures and Understanding the Brinson-Fachler Effects
Stuart Morgan
The Journal of Portfolio Management Jan 2014, 40 (2) 103-111; DOI: 10.3905/jpm.2014.40.2.103
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  • Article
    • Abstract
    • RELATIVE ATTRIBUTION
    • OPTION EXPOSURES
    • CHOOSING THE EXPOSURE
    • SECURITY ATTRIBUTION
    • ASSET TYPE ATTRIBUTION
    • GICS SECTOR ATTRIBUTION
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
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