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    Delta Neutralisation of a portfolio

    Hi, re the below question (which appears on the 2017 Mock Exam B): Suppose a financial institution has a portfolio that contains the following four positions in options on a stock: A long position in 20,000 call options and the delta of each of these...
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    FAQ Before Exam Practice Question Naming Convention

    I will soon start attempting to answer as many questions as possible in preparation for the exam in November. I have a few sources of questions from which to draw from, however when it comes to the BT practice questions can you shed some light on the naming conventions that have been used. For...
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    Two step binomial model

    In a two period binomial model, and assume that the option being valued is 6 months, with std deviation is 8 percent. For the initial up factor calculation the formula is Exp 0.08 srt .025. My question is why was time not calculated as .5, as this a 6 month call option? The up factor period...
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    BSM Model d1 and d2 and finding applicable z score

    I have two questions concerning d1 and d2 as inputs to the BSM model. 1. I have read in other sources that in the exam you will not likely be asked to calculate d1 and d2 but instead be provided with these as inputs for the BSM calculation. That said you will need to look up the applicable z...