question archive A bank's position in options on the dollar-euro exchange rate has a delta of 20,000 and a gamma of -60,000
A bank's position in options on the dollar-euro exchange rate has a delta of 20,000 and a gamma of -60,000
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A bank's position in options on the dollar-euro exchange rate has a delta of 20,000 and a gamma of -60,000. The exchange rate (dollars per euro) is 1.20. With these parameters, what position would you take to make the position delta neutral? After a short period, the exchange rate moves to 1.22. Estimate the new delta. What additional trade is necessary to keep the position delta neutral?
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