Question: Just part b) please thank you! Problem 2. Consider the following straddle portfolio Vn = PBS(tn, Sn) + CBS(tn, Sn) = = = = =

Just part b) please thank you! Problem 2. Consider the following

Just part b) please thank you!

Problem 2. Consider the following straddle portfolio Vn = PBS(tn, Sn) + CBS(tn, Sn) = = = = = = 1 250 with to = 0, t1 = 250, exercise price K = 100 and maturity T = 1. If So = 110, r = 0.02, 0 = 0.2 - and In(S1/S.) = 0.05, calculate the following for the time horizon At = (a) The loss L. (b) The loss LA and L4r if the risk factor is chosen to be the log-price of S. Problem 2. Consider the following straddle portfolio Vn = PBS(tn, Sn) + CBS(tn, Sn) = = = = = = 1 250 with to = 0, t1 = 250, exercise price K = 100 and maturity T = 1. If So = 110, r = 0.02, 0 = 0.2 - and In(S1/S.) = 0.05, calculate the following for the time horizon At = (a) The loss L. (b) The loss LA and L4r if the risk factor is chosen to be the log-price of S

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