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A bank has a portfolio of options on an asset. The delta and gamma of...

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Finance

A bank has a portfolio of options on an asset. The delta and gamma of the options (with respect to actual changes in the asset price) are -30 and -5, respectively. Explain how these numbers can be interpreted. What are the delta and gamma with respect to proportional changes in the asset price? The asset price is 20 and its volatility is 1% per day. Using Isserlis theorem, calculate the first three moments of the change in the portfolio value. Calculate a one-day 99% VaR (a) using the first two moments and (b) using the first three moments in conjunction with the Cornish-Fisher expansion.

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