A bank has sold 100 European call option contracts for $33,000 on 10,000 shares of a non-dividend-paying
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A bank has sold 100 European call option contracts for $33,000 on 10,000 shares of a non-dividend-paying stock. One contract represents 100 shares of the underlying stock.
Suppose S0 = 49, K = 50, r = 5%, σ = 25%, T = 20 weeks, the Black-Scholes-Merton value of the option is $30,000.
How does the bank delta hedge its risk to lock in a $3,000 profit?
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