I am working on a homework exercise where the aim is to price an asset or nothing put with K = St, offcourse the normal formula could be used St * N(-d1), but I was wondering if pricing the asset by making a replicating portfolio with the same cumulative greeks was also possible. In this context, I have a few questions.
If two portfolios have the same greeks does this mean the price should be the same by no-arbitrage?
Why use the greeks to price an exotic option and not the 'normal' formula, why would the results be better (as both are derived under the black Scholes framework)? Are for instance fewer assumptions needed?
Are my formulas for the greeks correct? I derived them and checked them multiple times(see attachment), but I am not sure they are correct.
When searching for a portfolio with cumulative greeks equal to the asset or nothing put how far can you realistically lever up before the flaws in the black Scholes framework make the answer unreliable. For instance, I expect a long position in 300 calls with strike 2600 and a short position in 300 calls with a strike of 2605 would be problematic?
I offcourse tried googling, but the answers I find seem contradictionary to me.