A bank has sold USD 300,000 of call options on 100,000 equities. The equities trade at 50,

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A bank has sold USD 300,000 of call options on 100,000 equities. The equities trade at 50, the option strike price is 49, the maturity is in three months, volatility is 20%, and the interest rate is 5%. How does the bank delta-hedge?

a. Buy 65,000 shares

b. Buy 100,000 shares

c. Buy 21,000 shares

d. Sell 100,000 shares

Related Book For answer-question

Risk Management and Financial Institutions

ISBN: 978-1118955949

4th edition

Authors: Hull John

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Posted Date: Aug 23, 2021 07:50 PM

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A bank has sold USD 300,000 of call options on 100,000 equities. The equities trade at 50,

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Solution We first need to find the Delta of a call o... View the full answer

Risk Management and Financial Institutions

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