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Payoff Profile
(redirected from Payoff Profiles)

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Payoff profile
The slope of a line graphed according to the value of an underlying asset on the x-axis and the value of a position taken to hedge against risk exposure on the y-axis. Also used with changes in value. See: Risk profile.

Payoff Profile
In options, a chart showing the profits and losses on a contract over time. It is calculated by plotting the value of the underlying asset on the x-axis and the risk on the y-axis.


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The payoff profiles in Figure 5 illustrate the impossibility of a riskier portfolio dominating a less risky one by stochastic dominance.
Offsetting payoff profiles are shown in the lower panel of Figure 1.
Readers will be able to see payoff profiles and will gain a good understanding of how options are used as a means of taking positions or reducing risk.
 
 
 
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