A bank has sold for $300,000 a European call option on 100,000 shares of a non-dividend...

 

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A bank has sold for $300,000 a European call option on 100,000 shares of a non-dividend paying stock. So S = 49, K = 50, r = = 5%, = 20%, T = 20 weeks The Black-Scholes value of the option is $240,000. How does the bank hedge its risk to lock in a $60,000 profit? A bank has sold for $300,000 a European call option on 100,000 shares of a non-dividend paying stock. So S = 49, K = 50, r = = 5%, = 20%, T = 20 weeks The Black-Scholes value of the option is $240,000. How does the bank hedge its risk to lock in a $60,000 profit?