Exam 17: The Greek Letters

A call option on a non-dividend-paying stock has a strike price of $30 and a time to maturity of six months. The risk-free rate is 4% and the volatility is 25%. The stock price is $28. What is the delta of the option?

The gamma of a delta-neutral portfolio is 500. What is the impact of a jump of $3 in the price of the underlying asset?

Which of the following is true for a call option on a non-dividend-paying stock?

A call option on a stock has a delta of 0.3. A trader has sold 1,000 options. What position should the trader take to hedge the position?

The risk-free rate is 5% and the dividend yield on an index is 2%. Which of the following is the delta with respect to the index of a one-year futures on the index?

Which of the following could NOT be a delta-neutral portfolio?

Which of the following is NOT a letter in the Greek alphabet?

When the interest rate is zero which of the following is true for a delta-neutral portfolio with a positive gamma?

Vega tends to be high for which of the following?

A trader uses a stop-loss strategy to hedge a short position in a three-month call option with a strike price of 0.7000 on an exchange rate. The current exchange rate is 0.6950 and value of the option is 0.1. The trader covers the option when the exchange rate reaches 0.7005 and uncovers (i.e., assumes a naked position) if the exchange rate falls to 0.6995. Which of the following is NOT true?

The delta of a call option on a non-dividend-paying stock is 0.4. What is the delta of the corresponding put option?

What does theta measure?

What does vega measure?

What does gamma measure?

Maintaining a delta-neutral portfolio is an example of which of the following?

Which of the following is true?

A portfolio of derivatives on a stock has a delta of 2400 and a gamma of -10. An option on the stock with a delta of 0.5 and a gamma of 0.04 can be traded. What position in the option is necessary to make the portfolio gamma neutral?

Which of the following is NOT true about gamma?

What does rho measure?

Gamma tends to be high for which of the following?