Question

Suppose you know that the gamma of the portfolio in the previous question is 16.2. How does this change your estimate of the relationship between the change in the portfolio value and the percentage change in the exchange rate? 

   Suppose you know that the gamma of the portfolio in the previous question is 16.2. How does this change your estimate of the relationship between the change in the portfolio value and the percentage change in the exchange rate?
Options, Futures, and Other Derivatives
Options, Futures, and Other Derivatives
John C. Hull 10th Edition
Chapter 22, Problem 4 ↓

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Gamma measures the rate of change of delta, which is the sensitivity of the portfolio value to changes in the exchange rate. In other words, gamma tells us how much the delta changes for a given change in the exchange rate. In the previous question, we estimated  Show more…

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Suppose you know that the gamma of the portfolio in the previous question is 16.2. How does this change your estimate of the relationship between the change in the portfolio value and the percentage change in the exchange rate?
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