Instruction: ? This is an individual assessment. Each student receives their individualised assignment in the form of a uniquely generated Excel file with one single worksheet “Sheet1” ? Record your answersin the same worksheet. The assignment will be auto-marked so you must record your answers in the designated cells of the worksheet. Failure to comply with this requirement may result in your answers not being picked up meaning a zero mark. ? Direct all queries to Hedging Assignment Forum in Moodle. ? Marked to total of 10, which accounts for 10% of overall assessment for the unit. ? To submit your assignment, go to the unit’s site in Moodle, click on “Hedging Assignment” under “Assessments and Exams” and follow the instruction to upload your Excel file (and nothing else). Do not change the name of the Excel file. ? 1 mark deducted per day for late submission without prior consent from myself ? You should be able to finish this assignment after lecture 9. Your portfolio: A stock is currently trading at 55. You hold a portfolio of the following instruments: ? Long 200 shares of stock ? Long 200 puts with a strike of 50 and maturity of three months (T=13/52) ? Short 200 calls with a strike of 60 and maturity of three months (T=13/52) All of the options are European options and each option is on 1 share. This portfolio information and information on interest rate and dividend are contained in the attached Excel file (rows 1-4). Prices of various options (including the ones held in your portfolio) are listed in the Excel file (see rows 6-12). Requirements: a. Based on the option prices, compute their implied volatility using the Black-Scholes model. Record your answers (in Sheet1) in range D7:D12 (6×0.25=1.5 marks). b. Based on the computed volatilities and information provided, compute delta, gamma and vega of the 6 options. Record your answers in range E7:G12. (18×0.25=4.5 marks). c. What is the objective of the strategy employed in your portfolio? Write the answer (A, B, C or D) in cell B14 (0.25 mark). A. Income B. Insurance C. Long volatility D. Short volatility d. Compute the portfolio’s value and write the answer in cell B15 (0.25 mark)