The following information is given for the European call option on Schlumberger ( SLB ) . S
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Question:
The following information is given for the European call option on
Schlumberger SLB S X rccontinuously compounded interest rate T days,
annualized implied volatility
a At time if a market maker, Robert sells units of call option on SLB how many shares an
integer of SLB does Robert buy for delta hedging his short call position?
b Based on the BS model, what is the current price of this European call option?
c Call option elasticitySCdelta Calculate the call option elasticity based on the above information.
d If an investor, Don, buys shares of SLB at $share how many units of call options an
integer on SLB does Don sell for delta hedging his long stock position?
e In part d calculate the initial hedging cost which is defined as the number of callsthe price of a
call option
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