Assume r = 8%, = 30%, = 0. Using 1-year-to-expiration European options, construct a position
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Assume r = 8%, σ = 30%, δ = 0. Using 1-year-to-expiration European options, construct a position where you sell two 80-strike puts, buy one 95-strike put, buy one 105-strike call, and sell two 120-strike calls. For a range of stock prices from $60 to $140, compute delta, vega, theta, and rho of this position. Explain intuitively the signs of the Greeks.
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This is a figure of the payoff diagram of the option position From this position the following Greeks result Alternatively just tabulate the Greeks in 5 stock price increases S delta vega theta rho 60 ...View the full answer
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