8.A financial institution has the following portfolio of over-the-counter options on dollars: Type Call Position Delta Gamma Vega 200 0.6 2.1 1.5 Put -100 -0.8 0.6 0.6 Call -250 0.7 1.7 1.5 A traded option is available with delta 0.5, gamma 1.25 and Vega 1.5. What position in the traded option and in dollars would make the portfolio both Gamma and Delta neutral? What position in the traded option and in dollars would make the portfolio both Vega and Delta neutral?
8.A financial institution has the following portfolio of over-the-counter options on dollars: Type Call Position Delta Gamma Vega 200 0.6 2.1 1.5 Put -100 -0.8 0.6 0.6 Call -250 0.7 1.7 1.5 A traded option is available with delta 0.5, gamma 1.25 and Vega 1.5. What position in the traded option and in dollars would make the portfolio both Gamma and Delta neutral? What position in the traded option and in dollars would make the portfolio both Vega and Delta neutral?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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am. 114.
Transcribed Image Text:8.A financial institution has the following portfolio of over-the-counter options on
dollars:
Type
Call
Position
Delta
Gamma
Vega
200
0.6
2.1
1.5
Put
-100
-0.8
0.6
0.6
Call
-250
0.7
1.7
1.5
A traded option is available with delta 0.5, gamma 1.25 and Vega 1.5.
What position in the traded option and in dollars would make the
portfolio both Gamma and Delta neutral?
What position in the traded option and in dollars would make the
portfolio both Vega and Delta neutral?
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