Question
The exercise price for Destini Berhad's stock is RM48. This stock is currently selling at RM52. The option has 4 months expiration. The annual
The exercise price for Destini Berhad's stock is RM48. This stock is currently selling at RM52. The option has 4 months expiration. The annual risk-free interest rate is 7%. The standard deviation has been estimated to be 30% per year. From the above information, you are required to answer the below questions. a. Calculate the value of the call option. b. Calculate the value of a put option. c. Destini Berhad owns 100,000 shares. Devise a delta hedge to protect against changes in the share price. (5 Marks) (10 Marks) (5 Marks) d. If Destini Berhad have already 50,000 written call options, devise a delta hedge to protect against changes in the share price. (5 Marks)
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