Suppose you are given the following data: 2-month option on XYZ stock: Underlying S = 118.49...
Suppose you are given the following data:
2-month option on XYZ stock:
Underlying S = 118.49
Strike X = 120
Put price = $2.1
A. What should be the price of call to prevent arbitrage if 2-month interest rate is 6% p.a.?
B. If the actual call price was $1.0, how would you implement an arbitrage opportunity?
C. Compute your payoff at maturity.
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Suppose you are given the following data:
2-month option on XYZ stock:
Underlying S = 118.49...
5. Suppose that you sold an American put option P on the underlying stock ABC. You...
5. Suppose that you sold an American put option P on the underlying stock ABC. You calculated the delta and gamma of the put option and found Ap = -0.4 and Ip= 0.3. Suppose you want a position which is both delta and gamma neutral. Determine the hedge in the following two cases: (a) Use the underlying stock itself and a call option C on the stock (with different strike and maturity as the put), with Ac 0.25 and Io...
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