Y
yeah_baby
Member
Sorry to just add to the list of questions waiting for an answer... if I could answer any of the others I would!
In the examiners report for this question (S05Q4(ii)) where does the equation
N phi(d1) = 250,000
come from?
Is it from saying that to hold a hedged portfolio you would hold an amount delta of shares, and then calculating delta by doing df/dS on the black-scholes formula?
If so, why can you do this? i.e. why can you ignore that there is an S term in both phi(d1) and phi(d2)?
My problem with part (iii) is probably more to do with just being totally fed up with this question, but I can't see where the first line comes from... or even why you want to be looking at phi(d1)/phi(d2) in the first place! I don't get how they've done the interpolation!
Any help would be greatly appreciated, thank you
PS Apologies if phi is not the right Greek letter (can't work out how to put it in as a symbol)
In the examiners report for this question (S05Q4(ii)) where does the equation
N phi(d1) = 250,000
come from?
Is it from saying that to hold a hedged portfolio you would hold an amount delta of shares, and then calculating delta by doing df/dS on the black-scholes formula?
If so, why can you do this? i.e. why can you ignore that there is an S term in both phi(d1) and phi(d2)?
My problem with part (iii) is probably more to do with just being totally fed up with this question, but I can't see where the first line comes from... or even why you want to be looking at phi(d1)/phi(d2) in the first place! I don't get how they've done the interpolation!
Any help would be greatly appreciated, thank you
PS Apologies if phi is not the right Greek letter (can't work out how to put it in as a symbol)