A company uses delta hedging to hedge a portfolio of long positions in put and call options on a currency. There are two different scenarios that may occur in the future:

Case A: A virtually constant spot foreign exchange rate

Case B: Wild movements in the spot foreign exchange rate Answer the following questions and explain your answer.

$($a$)$ Which of the following cases would give this company with the long positions in options the most favorable result? $(5$ points$)$

$($b$)$ A financial institution is the counterparty of this company and has short positions in put and call options on the currency. This financial institution also delta$-$hedges their short positions. Which of the above cases would give this financial institution with the short positions in options the most favorable result? $(5$ points$)$