2. Dynamic Delta Hedging Data file: Group project data canvas. csv Suppose, as a market maker, you sell call options (10,000 contracts) on 11/6/2021. The call option contract expires on 12/8/2021. The current stock price is 80. The strike price is 78. The annual volatility is 50%. The annual risk-free rate is 0.

1) Use the Black Scholes formula to drive the Call option price on each day on the Excel from November 11/6/2021 to 11/25/2021. Draw a diagram with X-axis as Date and the Y-axis as the call price.

2) Use Black Scholes formula to derive the delta of each call option contract on each day Consider the following three strategies.

a. Strategy A: Sell and hold the option short till 11/25/2021.

b. Strategy B: Static Delta Hedge: Perform the hedge initially, but do no rebalance after the first day, 11/6/2021

c. Strategy C: Daily Delta Hedge: Restore the delta to zero at the end of each day till 11/25/2021 3) What is the Total P&L at the end of 11/ 25/2021 for each strategy?

4) Draw the diagram of the cumulative P&L for each strategy over time. Essay Questions (10 points) 3. What is implied volatility? How do we estimate implied volatility for a given option contract? 4. What are the various trading strategies using VIX futures (list at least three different strategy)?