Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

After 20 trading days of dynamically delta-hedging, you have the following positions on the option expiration day: You short 200 call option contracts. Each contract

After 20 trading days of dynamically delta-hedging, you have the following positions on the option expiration day:

You short 200 call option contracts. Each contract is on 100 shares of the underlying stock. Strike price is $50.

You hold 19,981 shares of the underlying stock. Stock price is $52.11

You have accumulated $1,015,313 worth of debt as of the previous trading day. Interest rate is 0.015 per year (there are 252 trading days in a year).

You have $17,469 in your cash account (thats the premium you received from writing the calls originally)

Given that this is the expiration day, you are liquidating all your positions. Calculate the amount of debt you will be repaying in full today.

a.

$1,015,373

b.

$1,021,205

c.

$1,015,313

d.

$1,041,210

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Banker To The World

Authors: William Rhodes

1st Edition

0071704256, 978-0071704250

More Books

Students also viewed these Finance questions

Question

Identify three types of physicians and their roles in health care.

Answered: 1 week ago

Question

Compare the types of managed care organizations (MCOs).

Answered: 1 week ago