Repeat Problem 17.13 for a financial institution with a portfolio of short positions
Problem 17.14.
Repeat Problem 17.13 for a financial institution with a portfolio of short positions in put and call options on a currency.
Hint
A short position in either a put or a call option has a negative gamma. From Figure 17.8, when gamma is negative the hedger gains from a small change in the stock price and loses from a large change in the stock price....
A short position in either a put or a call option has a negative gamma. From Figure 17.8, when gamma is negative the hedger gains from a small change in the stock price and loses from a large change in the stock price.