# Question

Problem 12.11 showed how to compute approximate Greek measures for an option. Use this technique to compute delta for the gap option in Figure 14.3, for stock prices ranging from $90 to $110 and for times to expiration of 1 week, 3 months, and 1 year. How easy do you think it would be to hedge a gap call?

## Answer to relevant Questions

Consider the gap put in Figure 14.4. Using the technique in Problem 12.11, compute vega for this option at stock prices of $90, $95, $99, $101, $105, and $110, and for times to expiration of 1 week, 3 months, and 1 year. ...Suppose you observe the prices {5, 4, 5, 6, 5}. What are the arithmetic and geometric averages? Nowyou observe {3, 4, 5, 6, 7}. What are the two averages? What happens to the difference between the two measures of the ...Let S = $40, K = $45, σ = 0.30, r = 0.08, T = 1, and δ = 0. a. What is the price of a standard call? b. What is the price of a knock-in call with a barrier of $44? Why? c. What is the price of a knock-out call with a ...Use the information in Table 15.5. a. What is the price of a bond that pays one barrel of oil 2 years from now? b. What annual cash payment would the bond have to make in order to sell for $20.90? A DECS contract pays two shares if ST < 27.875, 1.667 shares if the price is above ST > 33.45, and $27.875 and $55.75 otherwise. The quarterly dividend is $0.87. Value this DECS assuming that S = $26.70, σ = 35%, r = 9%, ...Post your question

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