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solution

the derivative of delta with respect to the ?? Vanna is one of the “fake Greeks”, and is given by ?s volatility, sigma.

(a) Compute Vanna for a European Put option.

(b) Given that Vanna is 0.75, what is the best approximation of the change in the value of delta for a Put option with strike price E and time to expiration T-t, if the volatility increases by 2?
(a) Suppose a 60-strike European Call has a price of 5 when the value of the underlying asset is 75. If this option suddenly became an American Call option, would there be an arbitrage opportunity? Assuming there are no embellishments such as dividends, is this situation actually possible?

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