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1. A company uses delta hedging to hedge a portfolio of long positions in put and call options on a currency. Which of the following would give the most favorable result?
(a) A virtually constant spot rate
(b) Wild movements in the spot rate Explain your answer.
2. Repeat Problem for a financial institution with a portfolio of short positions in put and call options on a currency.
Problem :A company uses delta hedging to hedge a portfolio of long positions in put and call options on a currency. Which of the following would give the most favorable result?
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