Assume the Black-Scholes framework. You are given: (i) The current price of a stock is 60. (ii)
Question:
Assume the Black-Scholes framework. You are given:
(i) The current price of a stock is 60.
(ii) The stock pays no dividends.
(iii) The stock’s volatility is 30%.
(iv) The continuously compounded risk-free interest rate is 5%.
Suppose you have just bought 200 1-year 60-strike European call options.
Determine the numbers of units of a 1-year 65-strike European put option and the stock you should buy or sell in order to both delta-hedge and gamma-hedge your position in the 60-strike European calls.
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For the 60strike call d 460 60strike 160strike For the 65strike put d 65strike 65strike P I...View the full answer
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