Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You purchased a call on 100 shares of ABC. Use an option pricing formula that you built. Delta hedge the option thru the following changes

You purchased a call on 100 shares of ABC. Use an option pricing formula that you built. Delta hedge the option thru the following changes in price. In other words complete the table below. I gave you the first two lines.

$ lost or gained on hedging image text in transcribed

BOUGHT A CALL ON 100 SHARES +/-in Delta # of Total Hedge Delta shares held 50 0.517 -52.1 -52.1 51 0.611 -9.4 -61.5 53 55 Spot Price of option per share $ 1.735 $ 2.302 Gain/Loss on option $ - $57 Total Gain/Loss $ - $5 $- $ (52) 50 48 45 50 Total: $ (52) $ 57 $5 Forward 50 Interest Rate: 1% Divident Yield: O 50 Strike: Volatility 30 Time to Expiration 30 Days BOUGHT A CALL ON 100 SHARES +/-in Delta # of Total Hedge Delta shares held 50 0.517 -52.1 -52.1 51 0.611 -9.4 -61.5 53 55 Spot Price of option per share $ 1.735 $ 2.302 Gain/Loss on option $ - $57 Total Gain/Loss $ - $5 $- $ (52) 50 48 45 50 Total: $ (52) $ 57 $5 Forward 50 Interest Rate: 1% Divident Yield: O 50 Strike: Volatility 30 Time to Expiration 30 Days

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jack Kapoor, Les Dlabay, Robert J Hughes

9th Edition

0073382329, 9780073382326

More Books

Students also viewed these Finance questions

Question

How easy the information is to remember

Answered: 1 week ago

Question

The personal characteristics of the sender

Answered: 1 week ago