finance question

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Business Finance

Description

You have a Delta-neutral portfolio of options and underlying stocks with Gamma I1 and Vega I2.You can trade two options.The first option has Delta, Gamma and Vega, respectively, of .5, .6 and 1.5.The second option has Delta, Gamma and Vega, respectively, of .4, .7 and 2.5. Determine your hedging strategy to make your portfolio neutral for Delta, Gamma and Vega.

1.How many numbers of the first option will you trade?

2.How many units of the second option will you trade?


i1=-4190 i2= -7130

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Explanation & Answer

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