Compute the 95% 10-day VaR for a written strangle (sell an out-of-the-money call and an out-of-the-money put)
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Compute the 95% 10-day VaR for a written strangle (sell an out-of-the-money call and an out-of-the-money put) on 100,000 shares of stock A. Assume the options have strikes of $90 and $110 and have 1 year to expiration. Use the delta-approximation method and Monte Carlo simulation. What accounts for the difference in your answers?
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We first do the problem analytically since we have written options we receive the premiums which is ...View the full answer
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