Chapter $21$:You are a provider of portfolio insurance and are establishing a $4-$year program. The

portfolio you manage is worth $$120$ million, and you hope to provide a minimum return

of $0\%.$ The equity portfolio has a standard deviation of $18\%$ per year, and T$-$bills pay $5\%$

per year. Assume that the portfolio pays no dividends.

Required:

a$-1.$ What is the delta of the implicit put option conveyed by the portfolio insurance?

a$-2.$ How much of the portfolio should be sold and placed in bills?

b$-1.$ What is the delta if the new portfolio falls by $2\%$ on the first day of trading?

b$-2.$ Complete the following:

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Req A$1$

Req A$2$

What is the delta of the implicit put option conveyed by the portfolio insurance?

Note: Do not round intermediate calculations. Negative amount should be indicated by a min

decimal places.

The put delta is