Question: = = Problem 2. Consider the following straddle portfolio Vn = PBS(tn, Sn) + CBS(tn, Sn) with to = 0, ti 250, exercise price K

= = Problem 2. Consider the following straddle portfolio Vn =

= = Problem 2. Consider the following straddle portfolio Vn = PBS(tn, Sn) + CBS(tn, Sn) with to = 0, ti 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 Lr if the risk factor is chosen to be the log-price of S. - = - 250 = = Problem 2. Consider the following straddle portfolio Vn = PBS(tn, Sn) + CBS(tn, Sn) with to = 0, ti 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 Lr if the risk factor is chosen to be the log-price of S. - = - 250

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