Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Financial Mathematics. Only do question 3.3 3.1. Create an Excel worksheet in which the user inputs K, r, , q and T. Compute the delta
Financial Mathematics. Only do question 3.3
3.1. Create an Excel worksheet in which the user inputs K, r, , q and T. Compute the delta of a call option for stock prices S.01K, .02K, ..., 1.99K, 2K (i.e., S-iK/100 for i-1,...200) and plot the delta against the stock price. 3.2. The delta of a digital option that pays $1 when S(T)> Kis Repeat the previous problem for the delta of this digital. Given that in reality it is costly to trade (due to commissions, the bid-ask spread and possible adverse price impacts for large trades), do you see any problems with delta hedging a short digital near maturity if it is close to being at the money? 3.3. Repeat Prob. 3.1 for the gamma of a call optionStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started