Delta-hedge your option position

Assignment Help Financial Management

Reference no: EM131515157

You are long 1000 six months ATM Put options on a non-dividend-paying asset with spot price $100, following a lognormal process with volatility 30%. Assume the interest rates are constant at 5%.

(a) Delta-hedge your option position. Explain what you have to do (including borrowing or lending money).

(b) On the next trading day, the asset opens at $102. What is the value of your hedged position (the option and shares position)?

Reference no: EM131515157

Questions Cloud

Write an encrypted letter to your soviet contact : Write an encrypted letter to your Soviet contact explaining the recent past and current U.S. Cold War policies, events, and practices.

Find a general expression for the downwash velocity : A wing of symmetrical cross-section has an elliptical planform and is twisted so that, when the attack at the center of the span is 2?.

Recent policy issues regarding credit risk transfer : Read the Federal Reserve Bank of San Francisco (FRBSF) Economic Letter titled "Recent Policy Issues Regarding Credit Risk Transfer",

What is the profit equation for cvp analysis : What is the profit equation for CVP analysis, and what do each of its variables mean?

Delta-hedge your option position : Delta-hedge your option position. Explain what you have to do (including borrowing or lending money).

Identify the activities that add the most value for customer : Identify the activities that add the most value for the customer. Why? Which activities help McDonald’s to contain cost? Why?

What form would the transport equation take : In many engineering applications one is interested in the transport of a contaminant by the fluid flow. The contaminant could be anything from a polluting.

Resources and capabilities are core competencies : The resource-based view of the firm identifies four criteria that managers can use to evaluate whether particular resources-capabilities are core competencies

Describe the role of literature review : Describe the "role" of literature review for each methodology listed in the matrix; for example, does the literature review play a major or minor role?

User Account

All Pages