You hold a portfolio that is currently delta neutral. It has a gamma of -5000 and...

 

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You hold a portfolio that is currently delta neutral. It has a gamma of -5000 and a vega of -8000. There are two traded options in the market Gamma Vega 2.0 1.2 Option A Option B 0.5 0.8 Delta 0.6 0.5 a) What would you need to do to make the portfolio both vega and delta neutral? What will be the new value of gamma? b) What would you need to do if you had to make the original portfolio both gamma, vega and delta neutral? You hold a portfolio that is currently delta neutral. It has a gamma of -5000 and a vega of -8000. There are two traded options in the market Gamma Vega 2.0 1.2 Option A Option B 0.5 0.8 Delta 0.6 0.5 a) What would you need to do to make the portfolio both vega and delta neutral? What will be the new value of gamma? b) What would you need to do if you had to make the original portfolio both gamma, vega and delta neutral?

Answer rating: 100% (QA)

a To make the portfolio both vega and delta neutral we need to calculate the adjustments required fo... View the full answer