What does he need to do to maintain his delta neutral, Financial Management

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What does he need to do to maintain his delta neutral

1. Explain in words the difference between a MBS and a CDO.

2. Give one example of a use of a FRA. (Why would anybody be interested in this derivative?)

3. Consider an investor who owns a portfolio, and his hedging strategy is to keep it delta neutral. If the investor shorts 100 call options, and the current delta is 0.27, what does he need to do to maintain his delta neutral strategy? When the delta changes to 0.3, how does he need to alter his strategy?

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Financial Management: What does he need to do to maintain his delta neutral

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