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Question 3 (30 points). You are given the following information on two derivatives written on the same underlying stock : Derivative Price Delta Gamma A
Question 3 (30 points). You are given the following information on two derivatives written on the same underlying stock : Derivative Price Delta Gamma A 1 1 1 B 2 3 -3 You create a portfolio C by combining A and B. If derivative C has a zero delta and a gamma of 6, then : Calculate the value of the portfolio If now the price of the underlying increases by 0.1, using delta-gamma- approximation, compute the value of the portfolio C. Question 3 (30 points). You are given the following information on two derivatives written on the same underlying stock : Derivative Price Delta Gamma A 1 1 1 B 2 3 -3 You create a portfolio C by combining A and B. If derivative C has a zero delta and a gamma of 6, then : Calculate the value of the portfolio If now the price of the underlying increases by 0.1, using delta-gamma- approximation, compute the value of the portfolio C
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