Explain how these numbers can be interpreted

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A bank's position in options on the dollar/euro exchange rate has a delta of 30,000 and a gamma of 80,000. Explain how these numbers can be interpreted.

The exchange rate (dollars per euro) is 0.90. What position would you take to make the position delta neutral? After a short period of time, the exchange rate moves to 0.93. Estimate the new delta.

What additional trade is necessary to keep the position delta neutral? Assuming the bank did set up a delta-neutral position originally, has it gained or lost money from the exchange-rate movement?

Reference no: EM131237941

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