Hedging Scenario Matrix
Build a scenario matrix showing position risk and the hedge required across spot moves.
The scenario
You're long a book of call options and the desk head wants to know one thing before lunch: what happens if spot moves, and what hedge keeps you flat? Build the scenario grid — reprice across a band of spot moves, show the share hedge at each node, and find the scenario that hurts most.
Where this shows up
Scenario-and-hedge analysis on an options book is a core options-trading take-home at firms of this type.
Firms such as Optiver, IMC.
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Task brief
# Hedging Scenario Matrix **Role relevance:** Options trading-desk take-home. **Estimated time:** 50 minutes · **Difficulty:** Intermediate · **Format:** Excel (.xlsx) ## What you are given - `hedging_scenario_matrix_starter.xlsx` — a **Brief** tab, a **Formula Help** tab, an assumptions box and a **Scenario grid** template. Amber cells are yours to complete. ## What you must deliver 1. Reprice across a -10%..+10% spot grid via helper columns (d1, d2, N(d1), N(d2)) 2. Position PnL vs base, book delta and hedge shares at each node 3. Worst case via INDEX/MATCH 4. Two charts — PnL vs shock and hedge shares vs shock — and a one-line interpretation ## Submission note The Formula Help tab gives the Black-Scholes-in-Excel patterns. The solution workbook shows every formula and both charts.
Your tasks
- 01Reprice the option across a −10%…+10% spot grid (hold vol and rates constant).
- 02Compute the position PnL versus the base case at each node.
- 03Compute the book delta and the share hedge that flattens it at each node (helper columns: d1, d2, N(d1), N(d2)).
- 04Use INDEX/MATCH to report the worst-case PnL, its shock and the hedge there.
- 05Chart Position PnL vs spot shock and Hedge shares vs spot shock, then interpret the worst case.
How you're assessed
The full points-based mark scheme is included with the pack.
What you'll learn
- How an option book's value and delta change as spot moves.
- Why the hedge is dynamic — the changing delta across nodes is gamma.
- How desks stress a position before they put it on.