Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The price of a stock is $94. The stock does not pay dividends. The four call options described below are written on the stock. Type
The price of a stock is $94. The stock does not pay dividends. The four call options described below are written on the stock. Type Strike Maturity Price Delta Gamma Call 90 91 days $8.81 0.69088 0.02502 Call 95 91 days $6.03 0.55464 0.02807 Call 100 91 days $3.94 0.41878 0.02774 Call 95 180 days $9.18 0.59575 0.01956 A market-maker writes a 90-95-100 buttery spread with 91 days until maturity. The marketmaker uses the stock and the $95strike 180day call option to deltagamma hedge the position. The number of shares of stock that the marketmaker purchases to deltagamma hedge the position is X. The number of $95strike 180 day call options that the marketmaker purchases to deltagamma hedge the position is Y. X Calculate the ratio 7. aeoee
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