Assume the Black-Scholes framework. The current prices of a stock and a call option on the stock
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Assume the Black-Scholes framework. The current prices of a stock and a call option on the stock are $10 and $2, respectively.
You are given:
(i) ∆ = 0.6
(ii) Γ = 0.2
Use the delta-gamma approximation to estimate the option value if the stock price jumps to $10.50.
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