The purpose of the P&L statement is to show a business’s revenues and expenses about a specified time period, normally about 1 fiscal year.
$begingroup$ Assuming that you're Functioning for a bank, there are 3 distinct P&Ls depending on the purpose/ utilization:
At the conclusion of the working day, the EV/Avg(PNL) boils right down to iv vs rv of stock. If Those people two are equivalent, then the EV/PNL will be the exact same for the two traders no matter hedging frequency. The only difference would be the variance of their PNL as explained above.
In investment decision banking, PnL discussed (also known as P&L explain, P&L attribution or income and decline explained) is an profits assertion with commentary that characteristics or clarifies the day-to-day fluctuation in the value of the portfolio of trades to the root will cause with the changes.
Vega p/l is by definition the p/l due to moves in implied volatility. The 2nd A part of the problem you might have answered your self. Small dated alternatives have far more gamma publicity, long dated solutions have much more vega publicity.
It is usually the most popular and customary fiscal assertion in a business system, because it shows the amount of profit or loss was produced by a company.
$begingroup$ Rather In a natural way the two PnLs tend not to necessarily coincide. From the "school circumstance" you don't touch the portfolio at $t_1=t+delta t$ and liquidate it only at $t_2=t+2delta t,.
Investors and analysts use economic statements to evaluate the financial health of a corporation and its growth probable.
There are numerous subtleties to such a attribution, especially resulting from The reality that $sigma$ is usually modeled being a operate of $S$ and $t$, so you can find cross-outcomes among the greeks that make website it inexact.
$begingroup$ The information I have discovered about delta hedging frequency and (gamma) PnL on This web site and diverse Many others all reiterate the exact same point: that the frequency at which you delta-hedge only has an impact on the smoothness and variance within your PnL.
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As it is the pnl of the hedge that offsets the choice quality. Remember to ignore variances because of periodic vs continuous for this dilemma. $endgroup$
The online influence of everything is the fact amplified delta hedging frequency does just contain the smoothing impact on P/L in excess of prolonged plenty of time horizons. But such as you suggest you are exposed to one-off or exceptional signify reversion (or development) outcomes, but these dissipate above huge samples.
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