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A portfolio has a value of $50M. The risk-free rate is 5% and the volatility of returns is . The investment horizon is two years.

A portfolio has a value of $50M. The risk-free rate is 5% and the volatility of returns is . The investment horizon is two years. a. Assuming at the money options determine hedge ratios for the call and put. b. Show how the portfolio can be hedged using put options or T-Bills using a portfolio loss of 2%

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