### [solution] » (a) Suppose Flash Back (FB) is currently trading at S0 = \$122 and a trading firm holds the follow

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The Question

(a) Suppose Flash Back (FB) is currently trading at S0 = \$122 and a trading firm holds the following position:

 Option Type Quantity Strike = K Price r T ? European Call 2,000 125 \$1.91 0.01 0.1 0 European Put 1,000 120 \$2.38 0.01 0.1 0

What is the net delta and gamma of the position?

(b) The firm wishes to hedge the position using a European put on the same underlying, K = \$115, that they feel is bid too rich at \$1.78. What is the delta and gamma of that put? (round to 4 decimal places)

(c) Rounding to nearest whole option contracts, how many puts does the

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Solution #00020341

##### [solution] » (a) Suppose Flash Back (FB) is currently trading at S0 = \$122 and a trading firm holds the follow.zip

This paper was answered on 14-Oct-2020

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