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Hedging with Black and scholes Analytical Finance I Ellen Bjarnadóttir, Helga Daníelsdóttir and Koorosh Feizi
Introduction Our assignment Tools used to solve the problem Monta Carlo simulation Geometric Brownian motion (GBM) Black-Scholes model Delta hedge
Monte Carlo simulation Model that gives you possible result using random variables Calculating probabilty of random outcomes
Black and Scholes
Geometric Brownian Motion
Delta Hedge Changes in option price with respect to underlying stock price Reduces risk
Methodology Specify a model GBM Black & Scholes Parameters S, K, r, σ, T Generate random trials Process the output/results Stock Price Call Price – 15,07 Portfolio Value Rebalance – 9 times
Stock Price at maturity
Conclusion Summary Interpretation of our result Improvements
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