How hard is it to hedge a cod option

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Reference no: EM131368597

a. Value a European COD call option with the above inputs. (Hint: Recognize that you can construct the COD payoff by combining an ordinary call option and a cash-or-nothing call.)

b. Compute delta and gamma for a COD option. (You may do this by computing the value of the option at slightly different prices and calculating delta and gamma directly, rather than by using a formula.) Consider different stock prices and times to expiration, in particular setting t close to T .

c. How hard is it to hedge a COD option?

Reference no: EM131368597

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