Finance and Derivatives: Theory and Practice Finance and Derivatives: Theory and Practice Sébastien Bossu and Philippe Henrotte Calls or puts became popular derivatives because they allow buyers to bet on the direction of asset prices while limiting losses to the option premium. This payoff asymmetry appears clearly on a graph of the final P&L (profit and loss) of e.g. a long call position: 2 K K’ K K’ Chapter 8 Dynamic hedging P&L P&L