Describe the mm risk. 5.2 mm decides to mange the risk by using the stock to create a delta neutral position. what must mm do? 5.3 several days later, mm still holds the delta neutral position that opened in 5.2. the stock price have gone down and mm decides to rebalance the position and make it delta neutral again. without any calculation, what will mm do? explain. 5.4 the 1,000 calls that mm shorted will expire tomorrow. these calls are several dollar in-the money. describe mm’s delta-neutral position, assuming that mm rebalanced the position to keep it delta-neutral. 5.5 the next day the stock price decreased by several cents and the calls expired. describe what happened to mm’s position whatever cash flow mm incurred.
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