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Created a long volatility, neutral strategy (vega >0; delta= 0). suggested investment was for an
endowment fund so have considered carefully the levels of risk involved. Justified choice by considering the following factors: (i) the short duration of the strategy; (ii) current
market conditions (levels of the VIX, for example); (iii) historic volatility
of your asset and its current implied volatility; (iv) bidask spread and
liquidity of the relevant options, etc.
Graphed the expected profit/loss for our strategy for various choices of X,
assuming the stock price does not change and Implied Volatility changes by +/ 3%.
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