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Phil Johnson, CFA, is a portfolio manager in the United States and has been using a delta hedge strategy using $/€ put contracts on his €5,000,000 security portfolio. Johnson estimates the delta of the put contract to be -0.40, and Johnson used this value in composing his delta hedge. The $/€ exchange rate decreases from $1.25/€ to $1.2/€. The price of the put per Euro increases by $0.01. Based on this information, Johnson’s net position would: A. decline by $375,000. B. increase by $125,000. C. decline by $125,000. |