Question

A bank's position in options gamma of -80,000. Explain how these numbers can be interpreted. The exchange rate (dollars per euro) is 0.90. What position would you take to make the position delta neutral? After a short period of time, the exchange rate moves to 0.93. Estimate the new delta. What additional trade is necessary to keep the position delta neutral? Assuming the bank did set up a delta-neutral position originally, has it gained or lost money from the exchange-rate movement? on the dollar-euro exchange rate has a delta of 30,000 and a C

Answer 1

These can be foteapeted as an accer changes by Lthe vaue paiHiog will decrease by 30,000 Short 30,00o Euros Yo mace del ta neutral (lov00 (0.9o-0 93) 30000 New Deita 27600 change fu bank lost morey as a retatt Sx change rate 11 Sunday