Q1: Given the following inputs: Interest rate Dividend rate Spot Price Expiry (months) Volatility (%) 7.50 5.25 19.00 5 40.00 constructs a portfolio that implements the following option strategy: Strategy Low Strike Middle Strike High Strike Butterfly Spread KL = 15.00 KM = 19.00 KH = 23.00 = Using the Black-Scholes model, a) Graph the payoff and profit diagrams, labelling key points. b) Find delta and construct the delta hedged portfolio at time t = 0. c) Assume time doesn't change. Find the range of stock prices where the delta hedged portfolio shows a profit, the range where it shows a loss, and the breakeven points. d) Avishek never rebalances the delta hedge. Do the same as part c) but at the time the option expires. e) Find 3 stock prices x 0, (y) > 0, 1(z) > 0. (Compute each I.) Q1: Given the following inputs: Interest rate Dividend rate Spot Price Expiry (months) Volatility (%) 7.50 5.25 19.00 5 40.00 constructs a portfolio that implements the following option strategy: Strategy Low Strike Middle Strike High Strike Butterfly Spread KL = 15.00 KM = 19.00 KH = 23.00 = Using the Black-Scholes model, a) Graph the payoff and profit diagrams, labelling key points. b) Find delta and construct the delta hedged portfolio at time t = 0. c) Assume time doesn't change. Find the range of stock prices where the delta hedged portfolio shows a profit, the range where it shows a loss, and the breakeven points. d) Avishek never rebalances the delta hedge. Do the same as part c) but at the time the option expires. e) Find 3 stock prices x 0, (y) > 0, 1(z) > 0. (Compute each I.)