4. (Application in risk management) Consider the above bank's portfolio Position Amount Security 3 month call...
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4. (Application in risk management) Consider the above bank's portfolio Position Amount Security 3 month call Delta 0.57 Short 10,000 4,000 -0.32 3,000 -0.61 6 month put 4 month put Long Short Gamma 0.25 0.72 0.08 Suppose 9 month call option traded in the market whose delta = 0.45 and gamma= 0.02. How we use the call option to make delta and gamma of portfolio to be neutral. (Short 7,000 units of call option and long stock 8,300 units) 4. (Application in risk management) Consider the above bank's portfolio Position Amount Security 3 month call Delta 0.57 Short 10,000 4,000 -0.32 3,000 -0.61 6 month put 4 month put Long Short Gamma 0.25 0.72 0.08 Suppose 9 month call option traded in the market whose delta = 0.45 and gamma= 0.02. How we use the call option to make delta and gamma of portfolio to be neutral. (Short 7,000 units of call option and long stock 8,300 units)
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To create a delta and gammaneutral portfolio we need to make sure that the overall delta and gamma o... View the full answer
Related Book For
Understanding Basic Statistics
ISBN: 9781111827021
6th Edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase
Posted Date:
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