An Australian financial institution has a long position in 1,000 euros (EUR) and written 1,500...
60.1K
Verified Solution
Link Copied!
Question
Finance
An Australian financial institution has a long position in 1,000 euros (EUR) and written 1,500 call options and written 1,700 put options on the same currency. (Each option is to buy or sell 1 EUR.) The call options have a delta of 0.55 and gamma of 1.6, while the put options have a delta of -0.45 and gamma of 1.9.
i) Calculate the portfolios delta and gamma
ii) Show how the institution can use an exchange-traded put option on the EUR with a delta of -0.65 and gamma of 1.25 to make its portfolio delta and gamma neutral.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
