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The asset positions of a fund on the sterling-euro exchange rate has a delta of -20,000 a and a gamma of +50,000. 4 A a)
The asset positions of a fund on the sterling-euro exchange rate has a delta of -20,000 a and a gamma of +50,000. 4 A a) Explain how these numbers can be interpreted. + [4 marks] b) The exchange rate (sterling per euro) is 0.85. What position would you take to make the position delta neutral? [3 marks] a c) After a short period of time, the exchange rate moves to 0.89. Estimate the new delta. + [4 marks]+ d) What additional trade is necessary to keep the position delta neutral? [3 marks] U e) Assuming the bank did set up a delta-neutral position originally, has it gained or lost money from the exchange-rate movement? [6 marks] The asset positions of a fund on the sterling-euro exchange rate has a delta of -20,000 a and a gamma of +50,000. 4 A a) Explain how these numbers can be interpreted. + [4 marks] b) The exchange rate (sterling per euro) is 0.85. What position would you take to make the position delta neutral? [3 marks] a c) After a short period of time, the exchange rate moves to 0.89. Estimate the new delta. + [4 marks]+ d) What additional trade is necessary to keep the position delta neutral? [3 marks] U e) Assuming the bank did set up a delta-neutral position originally, has it gained or lost money from the exchange-rate movement? [6 marks]
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