Question
21.A bank has sold a large value call option to a corporate customer. The option has been sold for a value greater than the BSM
21.A bank has sold a large value call option to a corporate customer. The option has been sold for a value greater than the BSM model value for the option. "The most important hedge parameter for the bank in hedging the risk it has created in selling the option is the delta risk. The bank can ignore all the other hedge parameters." Is the statement in inverted commas and italics TRUE or FALSE? You must provide a short (one or two sentence) explanation for your answer. No explanation means no marks. Start your answer with "The statement is TRUE/FALSE." Then go on to answer why.
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