1.Explain in your own words what dynamic hedging is, and how a trader
could profit by dynamically hedging an option if they have a forecast
of volatility that is different to implied volatility.
2.Are exchange-listed options adjusted for the payment of an ordinary
dividend? If so, what about the option is adjusted?
3.Using just a call option (which controls 100 shares) with a delta of 0.5
and the underlying stock, how might you put on a delta neutral
position that is long volatility?
4.Do buyers of call options have to post margin? Why is this?
Question 1 around 500 words, Question 2,3 and 4 around 250 words.
No more than 1 reference for each question. The reference which is recommend to used is attached below.
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