Question: Assume the Black-Scholes framework. You are given: (i) The current price of a stock is 60. (ii) The stock pays no dividends. (iii) The stocks

Assume the Black-Scholes framework. You are given:

(i) The current price of a stock is 60.

(ii) The stock pays no dividends.

(iii) The stock’s volatility is 30%.

(iv) The continuously compounded risk-free interest rate is 5%.

Suppose you have just bought 200 1-year 60-strike European call options.

Determine the numbers of units of a 1-year 65-strike European put option and the stock you should buy or sell in order to both delta-hedge and gamma-hedge your position in the 60-strike European calls.

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