b. Calculate the overnight profit that will result if the stock price decreases to $54.50, resulting in

market conditions as described in the table below.

Inputs

sau woy blurw

Call

Put

Stock Price

54.5

Price

1.0768

1.4414

Exercise Price

55

Delta

0.4651

-0.5349

Volatility

20.000%

Gamma

0.1272

0.1272

Risk-free interest rate

3.000%

Vega

0.0621

0.0621

Time to Expiration (years)

0.082192

Theta

150.0227

-0.0182

Dividend Yield

0.000%

Rho

0.0199

-0.0251

c. A perfect hedge would have resulted in neither a profit nor a loss on the hedged position.

What property of options led to the dealer showing a loss on this delta-hedged position

overnight?

d. Is there any possible stock price move for which the overnight hedge would have led to a

profit? If not, explain why not. If so, indicate qualitatively what types of price moves will lead

to a profit, and explain what property of options leads to this profit.

waled oldest

iSET.0

93179

SIZE.0

8810.0

22

Bilaslov

2080.0

2030.0

sgev

8v.to.0

ASC0.0

SEe$80.0

e. Given the outcome in (b), if the dealer wishes to continue the delta hedge for another day,

how, if at all should the position be adjusted? Specifically:

i) How many more shares of stock should s/he buy or sell? i-web es cordero holesb orT .s

ii) How much more should s/he borrow or lend? wud da boon s aogb . egbe toT (