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Sensitivity of portfolio value to stock price variations

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Reference no: EM131637954

Question: Using the data in our ongoing example (stock price $60, volatility 30%, interest rate 8%), construct a delta-rho neutral portfolio to hedge a short position of 1, 000 call options expiring after 90 days with strike price $60, taking as an additional component a call option expiring after 120 days with strike price $65. Analyse the sensitivity of the portfolio value to stock price variations if the interest rate goes up to 9% after one day, comparing with the previous results. What will happen if the interest rate jumps to 15%?

Reference no: EM131637954

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