Question
Suppose we have a $10M portfolio that has a beta of .89. You decide to hedge this portfolio using S&P 500 index options. The S&P
-
Suppose we have a $10M portfolio that has a beta of .89. You decide to hedge this portfolio using S&P 500 index options. The S&P 500 index is currently at 3,557.54. You choose to use put options that expire in 30 days with a strike price of 3500. The risk free rate is .5%. The volatility of the S&P 500 is .22.
How many option contracts do you need to buy to create a delta neutral portfolio?
A. 66
B. 70
C. 80
D. 115
Step 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
Personal Finance
Authors: Jack Kapoor
12th Edition
125996776X, 9781259967764
