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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.
- © 2014 Pageant Media Ltd
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