You have written (sold) a three-month European call option at a strike price of $500. The current stock price (So) is $492.00, the annual risk-free interest rate is 4%, and the volatility of the underlying is 10%. Construct a delta hedge of this position using the underlying asset. Report your answer in the number of shares of the underlying purchased/sold. (Positive values indicate a purchase, negative a short)
You have written (sold) a three-month European call option at a strike price of $500. The current stock price (So) is $492.00, the annual risk-free interest rate is 4%, and the volatility of the underlying is 10%. Construct a delta hedge of this position using the underlying asset. Report your answer in the number of shares of the underlying purchased/sold. (Positive values indicate a purchase, negative a short)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter5: Financial Options
Section: Chapter Questions
Problem 4P: Put–Call Parity
The current price of a stock is $33, and the annual risk-free rate is 6%. A call...
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