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B1 Consider a given portfolio with delta equal to 2,000 and vega equal to 60,000. We plan to create a new portfolio that is both
B1 Consider a given portfolio with delta equal to 2,000 and vega equal to 60,000. We plan to create a new portfolio that is both delta and vega neutral by adding to the given portfolio: i) units of the underlying stock, and ii) units of a traded option with delta equal to 0.5 and vega equal to 10. How many units of the underlying stock and the traded option will we need? [5]
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