2. ABC mutual fund has the following portfolio (named A) of options: 5727 OPTION Call Call...

 

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2. ABC mutual fund has the following portfolio (named A) of options: 5727 OPTION Call Call Put Call (1) 2 iii) POSITION (No. Of Options Held) -1500 -1000 -3000 -1000 The following options are also available for trade: OPTION GAMMA Y 0.5 Z 0.6 1.5 What position in 2 and portfolio A would make the overall portfolio both gamma and delta neutral? What position in Z and portfolio A would make the overall portfolio both Vega and delta neutral? What position in Y, Z, and the portfolio A would make the overall portfolio both gamma, Vega, and delta neutral? DELTA GAMMA 0.5 2.2 0.8 0.6 -0.4 1.3 0.7 1.8 DELTA 0.1 VEGA 1.8 0,2 0.7 1.4 VEGA 0.3 0.6 P.T.O. 2. ABC mutual fund has the following portfolio (named A) of options: 5727 OPTION Call Call Put Call (1) 2 iii) POSITION (No. Of Options Held) -1500 -1000 -3000 -1000 The following options are also available for trade: OPTION GAMMA Y 0.5 Z 0.6 1.5 What position in 2 and portfolio A would make the overall portfolio both gamma and delta neutral? What position in Z and portfolio A would make the overall portfolio both Vega and delta neutral? What position in Y, Z, and the portfolio A would make the overall portfolio both gamma, Vega, and delta neutral? DELTA GAMMA 0.5 2.2 0.8 0.6 -0.4 1.3 0.7 1.8 DELTA 0.1 VEGA 1.8 0,2 0.7 1.4 VEGA 0.3 0.6 P.T.O.

Answer rating: 100% (QA)

To make the overall portfolio both gamma and delta neutral we need to ensure that the total gamma and delta of the combined portfolio are equal to zer... View the full answer