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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
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
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am. 114.

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?
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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