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A bank has sold for $250,000 a European call option on 100,000 shares of a non-dividend paying stock. Current stock price is $40, Strike is
A bank has sold for $250,000 a European call option on 100,000 shares of a non-dividend paying stock. Current stock price is $40, Strike is $50, risk-free rate is 5%, volatility is 25%, and the consider 10 weeks. Construct a delta-neutral hedge for this bank and compute the profit/loss at the end of the 10-week period.
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