So = (10 pt). Consider a Black-Scholes market. Suppose we have a stock $235 with volatility...
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So = (10 pt). Consider a Black-Scholes market. Suppose we have a stock $235 with volatility o 35% which doesn't pay dividends. The risk-free interest rate is r = 4%, and you sell a European 250-strike call option with 31 days to expiration. The option is written on 100 shares. (a) What investment is required for a delta-hedged portfolio? (b) If the stock price tomorrow is $241, what is your overnight profit? So = (10 pt). Consider a Black-Scholes market. Suppose we have a stock $235 with volatility o 35% which doesn't pay dividends. The risk-free interest rate is r = 4%, and you sell a European 250-strike call option with 31 days to expiration. The option is written on 100 shares. (a) What investment is required for a delta-hedged portfolio? (b) If the stock price tomorrow is $241, what is your overnight profit?
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To create a deltahedged portfolio we need to calculate the delta of the call option and then short the equivalent amount of shares a Delta of a call o... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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