choose me a SS people. i was leaning maybe towards SS8/9 corp fi b/c i haven’t touched it in a while but i’m game for whatever. did some quant last night after soccer. anyone? what’ll it be this lovely tuesday evening?
5
SS6
Do SS 17! If you haven’t done, can’t be more sadistic! LOL
5 i just did the john harris stuff for recently, 6 i could use a brush up on pensions but feel ok with the multinationals, 17 is rough. ok ss17, you’re up to bat for a 20q quiz. you’re evil solarpower.
5, 6, and 7. Any one of these has info with a high probability of showing up
you are correct skipE- best guess would be 1 set on pensions, one on multinationals, one on adjustments, and one on the ss5 stuff- consolidation blah blah blah. FSA is probably one of the areas where the predictability of the item sets is pretty good as opposed to other areas where god knows what we’ll get. that said, i’m in the middle of a ss17 quiz- this is a good one- bring it swaptiongamma you greek freak: Two call options have the same delta but option A has a higher gamma than option B. When the price of the underlying asset increases, the number of option A calls necessary to hedge the price risk in 100 shares of stock, compared to the number of option B calls, is a: A) smaller (negative) number. B) larger positive number. C) larger (negative) number.
A? I am sure abt smaller, but don’t know if it’s a + or a -ve
I AM A GOLDEN GOD Score As You Go: 90.00% (18/20) with 0 to go hang one sec SG- let me get that q- it was one of my 2 wrong… greeks are not my specialty. i went 6/6 on 2 item sets though and did a currency swap and got the right answer. slowly but surely, i think derivs are falling into place for me this year WAY more so than last year. i am gunning for an over 70 on derivs.
Your answer: C was incorrect. The correct answer was A) smaller (negative) number. For call options larger gamma means that as the asset price increases, the delta of option A increases more than the delta of option B. Since the hedge ratio for calls is – 1/delta, the number of calls necessary for the hedge is a smaller (negative) number for option A than for option B
I finished the second pass on Corp Fin, and feel good for once about it. Treated myself to 2 brews, ahhhh life.
Good question. The way I think of it without formulas is this: If you have a higher gamma = i.e. closer to being at-the-money (and potentially close to expiration) an increase in price will mean that the price of the option A will increase at a higher rate relative to option B. If that’s the case, delta will move closer to 1, approximating a 1 to 1 offset in the stock price. You’ll need less options as a result to “cover” the stock price move. So remember, as delta --> 1, moves in exact proportion of the stock, will need less options to hedge number of stocks (in the case of delta = 1, you will need the same number of options as shares)
Ali can you explain why the (negative) in the bracket. I completely understand smaller was needed and hence got the right ans.
The investor is long the shares and short the call options H = nS - C where n is the hedge ratio, or delta (change in call price / change in stock price) The number of calls required to hedge is = number of shares / delta Since when did hedge ratio = - 1 / delta?
yeps - the Hedge ratio is used to decide how many option contracts you need to LONG(put options) or SHORT (call options) to maintain a 0 delta for the stock you own.
Do you want 0 delta or delta of 1? Oh you mean over all position, 0 delta
We want to make the portfolio numb/insensitive to the volatility of the underlier. Hence D=0 is what we seek.
Right. When we hedge like this, what will be the return, the risk free rate?
Hi bannisja. Do u support Man Utd or Chelsea ? I’m an Arsenal fan Anyone else luvs soccer ?
AC Milan.