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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Question
You are a fund manager who has been given the following portfolio:
Delta exposure: — Gamma exposure: -7000 Vega exposure: 6,000
You have access to the following two options
Option A: Delta: 2.8 Gamma: 1.4 Vega: 2.0
Option B: Delta: 1.2 Gamma: 0.7 Vega: 1.5
A) Calculate the number of option A and Option B contracts to make your portfolio gamma and Vega neutral
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