Payoff profile

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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They are unlikely to discourage speculation on their own in the absence of broader macro-economic policies, given the asymmetric risk-reward payoff profile of SAR speculative trades, in our view.
As shown in Figure 2, the shape of the payoff profile is roughly a mirror image of the debt profile: the payoff rate declines rapidly for younger ages, becomes steady in the middle age range, and starts to increase in later life.
It represents the same risk or payoff profile as a long position in a risky asset or buying a forward or futures contract or swap.
This is the payoff profile of a short position in a risky asset or stock or selling a forward, futures, or swap contract.
This is another "natural hedge" in that one risk profile is offset by an opposite payoff profile.
Offsetting payoff profiles are shown in the lower panel of Figure 1.
Different selling, purchasing, borrowing, lending, and/or investment patterns can achieve payoff profiles equivalent to those produced by forward, futures, and swap contracts.
The offsetting payoff profiles for a short position in risky assets or risky securities is: buy forwards or futures, increase long positions in assets, long a call plus short a put, or increase the ratio of risky assets to riskless assets.
However, a key obstacle to undertaking this assessment has been the complexity of comparing retirees outcomes from products with diverse features, return drivers and payoff profiles.
The payoff profiles in Figure 5 illustrate the impossibility of a riskier portfolio dominating a less risky one by stochastic dominance.
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.