Suppose that JPMorgan Chase sells call options on $3.05 million worth of a stock portfolio with...
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Suppose that JPMorgan Chase sells call options on $3.05 million worth of a stock portfolio with beta = 2.15. The option delta is 0.54. It wishes to hedge its resultant exposure to a market advance by buying a market-index portfolio. Suppose it use market index puts to hedge its exposure. The index at current prices represents $2,000 worth of stock and the contract multiplier is 400. Required: a. How many dollars' worth of the market-index portfolio should it purchase? b. What is the delta of a put option? c. Complete the following: Complete this question by entering your answers in the tabs below. Required A Required B Complete the following: Required C Note: Do not round your intermediate calculations. Round your answer to 1 decimal place. Assuming the 1 percent market movement, JP Morgan should sell put contracts. Suppose that JPMorgan Chase sells call options on $3.05 million worth of a stock portfolio with beta = 2.15. The option delta is 0.54. It wishes to hedge its resultant exposure to a market advance by buying a market-index portfolio. Suppose it use market index puts to hedge its exposure. The index at current prices represents $2,000 worth of stock and the contract multiplier is 400. Required: a. How many dollars' worth of the market-index portfolio should it purchase? b. What is the delta of a put option? c. Complete the following: Complete this question by entering your answers in the tabs below. Required A Required B Complete the following: Required C Note: Do not round your intermediate calculations. Round your answer to 1 decimal place. Assuming the 1 percent market movement, JP Morgan should sell put contracts.
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