You work at an investment bank which recently wrote a custom (not publicly traded) option to a client.     The option was based on the value of bitcoin (BTC) and had a strike price of $80,000 and expires in 2 months. BTC currenlty trades for $70,000.    BTC has an annualized volatility of 70%. The current risk free rate is 5%    The option was for 1000 BTC coins.       You need to create hedge using long positions in BTC.  How much BTC should you buy today?     

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To create a hedge using long positions in BTC we need to determine the appropriate amount of BTC to ... View the full answer