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LOS f: Explain the gamma effect on an option's price and delta and how gamma can affect a delta hedge.
Q1. Which of the following is the best approximation of the gamma of an option if its delta is equal to 0.6 when the price of the underlying security is 100 and 0.7 when the price of the underlying security is 110?
A) 0.01.
B) 0.10.
C) 1.00.
Q2. How is the gamma of an option defined? Gamma is the change in the:
A) delta as the price of the underlying security changes.
B) vega as the option price changes.
C) option price as the underlying security changes.
Q3. When an option’s gamma is higher:
A) delta will be higher.
B) a delta hedge will be more effective.
C) a delta hedge will perform more poorly over time.
Q4. Gamma is the greatest when an option:
A) is deep in the money.
B) is at the money.
C) is deep out of the money.
Q5. Two call options have the same delta but option A has a higher gamma than option B. When the price of the underlying asset increases, the number of option A calls necessary to hedge the price risk in 100 shares of stock, compared to the number of option B calls, is a:
A) smaller (negative) number.
B) larger positive number.
C) larger (negative) number. | 
发表于 2009-3-28 17:01
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