You are a fund manager who has been given the following portfolio: Portfolio Delta exposure You...
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You are a fund manager who has been given the following portfolio: Portfolio Delta exposure You have access to the following two options Delta 0.8 1.2 Option A Option B Gamma exposure -4,500 Gamma 0.5 0.6 Vega exposure 1,800 Vega 2.4 3.6 (a) Calculate the number of Option A and Option B contracts to make your Portfolio Gamma and Vega Neutral (b) Following on from your results in question (a) above, what trade would you do to make your portfolio Delta Neutral now? (c) Who would prefer to be Gamma and Vega neutral? An option buyer or option writer? Explain you reasonings why? In your answer, describe their objectives, their key concerns and the reasoning behind why they would implement a Delta, Gamma, Vega Neutral strategy. You are a fund manager who has been given the following portfolio: Portfolio Delta exposure You have access to the following two options Delta 0.8 1.2 Option A Option B Gamma exposure -4,500 Gamma 0.5 0.6 Vega exposure 1,800 Vega 2.4 3.6 (a) Calculate the number of Option A and Option B contracts to make your Portfolio Gamma and Vega Neutral (b) Following on from your results in question (a) above, what trade would you do to make your portfolio Delta Neutral now? (c) Who would prefer to be Gamma and Vega neutral? An option buyer or option writer? Explain you reasonings why? In your answer, describe their objectives, their key concerns and the reasoning behind why they would implement a Delta, Gamma, Vega Neutral strategy.
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Answer rating: 100% (QA)
To calculate the number of Option A and Option B contracts needed to make the portfolio gamma and vega neutral we can use the following formulas Number of Option A contracts Portfolio Gamma Exposure G... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
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