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Calculate the portfolio delta and gamma

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Reference no: EM132755820

Question - A British financial institution has written 1,300 call options and written 2,600 put options on the euro (EUR). (Each option is to buy or sell 1 EUR.) The call options have a delta of 0.6 and gamma of 1.5, while the put options have a delta of -0.4 and gamma of 1.1.

Required -

i) Calculate the portfolio's delta and gamma?

ii) Show how the institution can take a position in the currency and use an exchange-traded put option on the EUR with a delta of -0.5 and gamma of 1.3 to make its portfolio delta and gamma neutral.

Reference no: EM132755820

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