a. Value a European COD call option with the above inputs. (Hint: Recognize that you can construct the COD payoff by combining an ordinary call option and a cash-or-nothing call.)
b. Compute delta and gamma for a COD option. (You may do this by computing the value of the option at slightly different prices and calculating delta and gamma directly, rather than by using a formula.) Consider different stock prices and times to expiration, in particular setting t close to T .
c. How hard is it to hedge a COD option?
Call Us: USA +1 862 207 3288