Question: Describe why sometimes Delta hedging is not sufficient in cancelling a port- folio's risk exposure. (Your answer cannot be more than 50 words. Answers

Describe why sometimes Delta hedging is not sufficient in cancelling a port- folio's risk exposure. (Your answer cannot be more than 50 words. Answers with more than 50 words will not be graded.) (ii) (5 points) Suppose you predict that the stock prices of firms A and B will be the same, while currently Stock A is much more expensive than B, what kind of trade should you do? What might be the potential risk for your trade? (Your answer cannot be more than 50 words. Answers with more than 30 words will not be graded.) (iii) (5 point) Suppose there are two put options with identical underlying, strike prices and maturities T. One is American and the other is European. If the investor chooses to exercise the American option at t

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