Question: Consider a 40-strike 180-day call with S = $40. Compute a delta-gamma-theta approximation for the value of the call after 1, 5, and 25 days.

Consider a 40-strike 180-day call with S = $40. Compute a delta-gamma-theta approximation for the value of the call after 1, 5, and 25 days. For each day, consider stock prices of $36 to $44.00 in $0.25 increments and compare the actual option premium at each stock price with the predicted premium. Where are the two the same? Discuss.

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TABLE 3 1 day Future S 5 days Actual Approx Actual Approx Approx Actual 1d 25d 3600 19921 16883 17660 00257 00777 00683 18663 00217 19701 00181 00257 ... View full answer

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