Assume S = $33.00,σ = 0.32,r = 0.06,div = 0.01,on a $35 strike call.Given delta = 0.3854 and gamma = 0.0847,what is the delta-gamma approximation for the call price on a $0.50 stock price increase? Assume 68 days until expiration.

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Quizplus · Accepted Answer

The delta-gamma approximation for the call price on a $0.50 stock price increase is:Delta-gamma approximation = Delta * Stock price increase + Gamma * (Stock price increase)^2= 0.3854 * 0.50 + 0.0847 * (0.50)^2= 0.3854 * 0.50 + 0.0847 * 0.25= 0.1927 + 0.0212= $0.2139Therefore, the delta-gamma approximation for the call price on a $0.50 stock price increase is $0.2139.