Model-building approach when delta close to zero


Assignment:

A common complaint of risk managers is that the model-building approach (either linear or quadratic) does not work well when delta is close to zero. Test what happens when delta is close to zero in using Sample Application E in the DerivaGem Application Builder software. (You can do this by experimenting with different option positions and adjusting the position in the underlying to give a delta of zero.) Explain the results you get.

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Risk Management: Model-building approach when delta close to zero
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