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Unformatted text preview: Example on Greeks All the options in this example are European. We assume that BlackScholes holds. This morning, S = 50 , = 0 . 2 and r = 0 . 05 . The following options are traded on the market: Option 1: call with K = 45 , T = 26 / 52 Option 2: call with K = 50 , T = 13 / 52 Option 3: call with K = 40 , T = 52 / 52 Option 4: call with K = 45 , T = 52 / 52 Option 5: call with K = 55 , T = 26 / 52 We can compute the price and the greeks of these options: c 1 = 6 . 7493 1 = 0 . 8395 1 = 0 . 0345 1 = 8 . 6191 c 2 = 2 . 3075 2 = 0 . 5695 2 = 0 . 0786 2 = 9 . 8220 c 3 = 12 . 2944 3 = 0 . 9286 3 = 0 . 0136 3 = 6 . 8136 c 4 = 8 . 3497 4 = 0 . 8097 4 = 0 . 0272 4 = 13 . 5813 c 5 = 1 . 4532 5 = 0 . 3349 5 = 0 . 0515 5 = 12 . 8787 This morning, our portfolio is composed of 10 units of option 1, 10 units of option 2 and 5 units of option 3. We want to hedge this portfolio....
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This note was uploaded on 10/05/2009 for the course ECG 590 taught by Professor Msmorril during the Fall '08 term at N.C. State.
 Fall '08
 msmorril

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