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NEW QUESTION: 1
Between two options positions with the same delta and based upon the same underlying, which would have a smaller VaR?
A. the position with a lower gamma
B. the position with a higher theta
C. both positions would have an identical VaR
D. the position with a higher gamma
Answer: D
Explanation:
Explanation
The second order approximation of the VaR of an options position is given by [Option delta x Underlying's VaR - Option gamma/2 x (Underlying's VaR)