Calculate the delta and gamma of this call

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Reference no: EM133578759

Question

Data: Six-month call on 1000 X shares with an exercise price of 45 euros. The share price today is 55 euros and its annualized volatility is 25%. The risk-free interest rate is 1% per year.

Question 1: Calculate today's price of this Call using the Black and Scholes model.

Question 2: Calculate the delta and gamma of this Call.

Question 3: How can the seller of such a Call make his position delta-neutral?

Question 4: In one month, the price of share X becomes 60 euros. Why is the previous position no longer delta-neutral and what should the seller do to make it delta-neutral again?

Reference no: EM133578759

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