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NEW QUESTION: 2
Donaghy Management Company (DMC) manages several funds only available to high net worth individuals. In preparation for an upcoming meeting, the firm has circulated among its managers the information in Figure 1 on objectives and market expectations relevant to each of three funds.
Figure 1: Fund Strategies and Market Expectations

The manager of Fund A has collected data on put and call options on the broad market index underlying his strategy. The option data are presented in Figure 2. All options presented have the same expiration date.
Figure 2: Option Data for the Broad Market Index

During the meeting, the manager of Fund B states that in order to enhance returns for the fund, he intends to implement a box-spread strategy. The manager explains the strategy by stating, "The ending price of the asset underlying the box-spread strategy has no impact on the payoff of the strategy.
Thus, if the market price of the strategy implies a rate of return greater than the risk-free rate, an arbitrage opportunity exists." Also during the meeting, DMC's president questioned the manager of Fund C about the mechanics of his hedging strategy. The manager explained the strategy with the following comments:
Comment 1: "The hedge position is established to reduce the exposure to certain equity positions by writing call options on those equity positions. The necessary number of short option positions per share of stock held is calculated as the inverse of the option delta." Comment 2: "The hedge position only requires adjusting in the event of a price or volatility change in the underlying and is effective for small changes in the price of the underlying security." Under which of the following scenarios will Fund C be most exposed to the gamma effect resulting from delta hedged equity positions? When the option used to delta hedge is:
A. deep in-the-money and close to expiration.
B. at-the-money and close to expiration.
C. at-the-money and not close to expiration.
Answer: B
Explanation:
Explanation/Reference:
Explanation:
Gamma is a measure of the change in delta resulting from a change in the price of the underlying security.
Gamma is largest for options that are at-the-money and/or near expiration. This implies that at-the-money options nearing expiration have unstable deltas which will move rapidly with any change in the price of the underlying security. Delta hedging in such an environment is difficult. (Study Session 15. LOS 43.e)

NEW QUESTION: 3
Click the exhibit button below. A network operator has configured the SAP-ingress policy below. Ping traffic is expected in queue 3. However, the network operator notices that all traffic is placed in queue 1.
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D. Thedefaultforwardingclassfor alltraffic,includingICMP,isBE,whichisplacedin queue1.
E. TheIP-match criteria hasbeenmisconfigured forICMPtraffic.
Answer: A

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