An Australian financial institution has a long position in 1,000 euros (EUR) and written 1,500 call options and written 1,700 put options on the same currency.  (Each option is to buy or sell 1 EUR.)  The call options have a delta of 0.55 and gamma of 1.6, while the put options have a delta of -0.45 and gamma of 1.9. 

 i) Calculate the portfolio's delta and gamma

ii) How the institution can use an exchange-traded put option on the EUR with a delta of -0.65 and gamma of 1.25 to make its portfolio delta and gamma neutral.

Answer rating: 100% (QA)

1000 long euros s 1500 written call options 1700 written put option 9 Portfolio delta de... View the full answer