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Suppose you are a trader at a bank with a portfolio of 100 long call options on the S&P 500 with a delta of 0.8
Suppose you are a trader at a bank with a portfolio of 100 long call options on the S&P 500 with a delta of 0.8 ( = 0.8). Assume the current price of the S&P 500 is $1266, and its returns are normally distributed with mean of 5% and standard deviation of 15%, and the risk-free rate is 2% (all annualized). (19 points) (a) What is the one month 99% VaR for an investor who holds one share long in the S&P 500 given the assumptions above and interpret what this means?
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