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The difference between C’ and C” causes a hedging error. the dimensions with the error depends upon the curvature of the relationship concerning the option selling price as well as stock selling price (which is named Gamma).
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simply call choices have beneficial Rho even though set solutions have destructive Rho. As a result, phone solutions commonly increase in price as fascination premiums improve and put possibilities usually minimize in rate as curiosity costs improve.
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