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7. (05 marks) Assume that the Black-Scholes framework holds. Consider an option on a stock. You are given the following information at time 0: (i)
7. (05 marks) Assume that the Black-Scholes framework holds. Consider an option on a stock. You are given the following information at time 0: (i) The stock price is S(0), which is greater than 80. (ii) The option price is 2.34. (iii) The option delta is -0.181. (iv) The option gamma is 0.035. The stock price changes to 86.00. Using the delta-gamma approximation, you find that the option price changes to 2.21. Determine S(). 3 3/4
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