Suppose that an investor has an initial long position of $500 dollars in stock A. She...
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Suppose that an investor has an initial long position of $500 dollars in stock A. She wants to use stock B to hedge this position. We have the following parameters: SA = 100, SB = 200, σA = 0.25, B = 0.2, PAB=0.20, where S is the initial stock price, o is the volatility of the return, and p is the correlation between the returns. How many units of stock B should the investor buy of stock B for optimal hedging? Enter a positive number when buying and a negative number when selling (e.g., enter -3 when selling 3 units of stock B). Use 2 decimal places for your answer. Suppose that an investor has an initial long position of $500 dollars in stock A. She wants to use stock B to hedge this position. We have the following parameters: SA = 100, SB = 200, σA = 0.25, B = 0.2, PAB=0.20, where S is the initial stock price, o is the volatility of the return, and p is the correlation between the returns. How many units of stock B should the investor buy of stock B for optimal hedging? Enter a positive number when buying and a negative number when selling (e.g., enter -3 when selling 3 units of stock B). Use 2 decimal places for your answer.
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Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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