You use the Black-Scholes-Merton model for a put option on a stock. You calculate N(d1) = 0.60

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You use the Black-Scholes-Merton model for a put option on a stock. You calculate N(d1) = 0.60 and N(d2) = 0.56.

a) What is the delta of the put option?

b) You short 100 put options.

How would you hedge your delta exposure using the underlying stock?

How many shares would you need to buy or sell?

Related Book For answer-question

Financial Markets and Institutions

ISBN: 978-1337099745

12th edition

Authors: Jeff Madura

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Posted Date: May 03, 2023 12:47 AM

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You use the Black-Scholes-Merton model for a put option on a stock. You calculate N(d1) = 0.60

Question:

Expert Answer:

a The delta of a put option can be calculated as follows deltaput Nd1 1 T... View the full answer

Financial Markets and Institutions

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