HW2

docx

School

Baruch College, CUNY *

*We aren’t endorsed by this school

Course

MISC

Subject

Finance

Date

Jan 9, 2024

Type

docx

Pages

3

Uploaded by wlopezf

Report
:)> Review Test Submission: HW2-Option Behaviors Review Test Submission: HW2-Option Behaviors User William L Lopez Flores Course 2023 Fall Term (1) Options Markets FIN 9797 UWA[16297] (Baruch College) Test HW?2-Option Behaviors Started 9/20/23 5:40 PM Submitted 9/20/23 5:46 PM Due Date 10/11/23 1:00 PM Status Completed Attempt Score 110 out of 110 points Time Elapsed 5 minutes Results Displayed All Answers, Submitted Answers, Correct Answers Question 1 10 out of 10 points Consider a long call option position with strike K=80 and expiry T. What is the payoff when the option is exercised at expiry T [a] if the security price at expiry (S_T) is 100? [b] what is the payoff if ST is 80? [c¢] what is the payoff if ST is 120? Specified Answer for:a & 20 Specified Answer for:b & 0 Specified Answer for: ¢ & 40 Question 2 10 out of 10 points "If you are a long put option with strike K=80 and with expiry T, the current stock price is $100. What is the option's intrinsic value? (assume 0 rates or dividends)" Selected Answer: & 0 Correct Answer: & 0 Answer range +/-0(0-0) Question 3 10 out of 10 points "If you want to replicate the forward contract with calls and puts at delivery price K=80 and expiry T, how will you do it? ""long"™ or ""short"" [a] a call and ""long™ or ""short™ [b] a put to create a long forward. ""long™ or ""short™ [c] a call and ""long™ or ""short™ [d] a put to create a short forward position. " Specified Answer for:a @& long Specified Answer for:b @& short Specified Answer for: ¢ @& short Specified Answer for:d & long
Question 4 10 out of 10 points "Assume zero rates and no dividends, the forward price is $100. If the call and the put (at K=80 and same T) are quoted at $26 and $5, respectively. There is an arbitrage and you can lock in an arbitrage profit by ""buy™ or ""sell™ [a] a call, ""buy™ or ""sell"" [b] a put, and ""long™" or ""short™ [c] the forward all at K=80 and the same expiry T. How much will be the arbitrage profit in US dollar? (in integers ) [d] " Specified Answer for:a @ sell Specified Answer for: b @& buy Specified Answer for: ¢ & long Specified Answer for:d @ 1 P S Question 5 10 out of 10 points "Assume zero rates and no dividends, the forward price is $100. How to make an arbitrage trade if the call (at K=100) is quoted at $101? ""buy™ or ""sell™ [a] the call at K=100 for [b] and ""buy™ or ""sell"" [c] the forward at K=0 for [d]. This allows you to net [e] dollar today with no future liability." Specified Answer for:a @ sell Specified Answer for:b @ 101 Specified Answer for: ¢ & buy Specified Answer for:d & 100 Specified Answer for:e @& 1 Question 6 10 out of 10 points "Assume zero rates and no dividends, the forward price is $100. How to make an arbitrage trade if the call (at K=80) is quoted at $19? Answer: ""buy™ or ""sell"™" [a] the call at K=80 for [b] and ""buy™" or ""sell™" [c] the forward at K=80 for [d]. This allows you to net [e] dollar today and with non-negative future payoffs." Specified Answer for:a @ buy Specified Answer for:b @& 19 Specified Answer for: ¢ @& sell Specified Answer for: d @& 20 Specified Answer for:e & 1 Question 7 10 out of 10 points "Assume zero rates and no dividends, the forward price is $100. If an European put at K=110 is quoted at $111, what is the minimum amount you can make at expiry by selling the put at the quoted price? " Selected Answer: & 1 Correct Answer: & 1 Answer range +/-0(1-1)
Question 8 10 out of 10 points "Assume zero rates and no dividends, the forward price is $100. If a put at K=110 is quoted for $9, you can lock in an arbitrage profit by [a] (""long™ or ""'short™) the forward at K=110 to receive [b] dollars and [c] (""buy™ or ""sell"") the put at K=110 for [d] dollars " Specified Answer for:a @ long Specified Answer for:b @& 10 Specified Answer for: ¢ @& buy Specified Answer for:d @ 9 Question 9 An option is said to be in-the-money spot if the option has positive value when exercised right now Selected Answer: & True Answers: @ True False Question 10 American options can only be exercised at the expiry. Selected Answer: & False Answers: True @ False Question 11 10 out of 10 points 10 out of 10 points 10 out of 10 points "Suppose you constructed an option portfolio on the 1-year S&P index that include (i) short 1 put contract at K = 1500, (ii) long 1 put contract at K = 2000, (iii) short 1 call contract at K = 3000, and (iv) long 1 call contract at K = 3500. How much will be the payoff if the index level (i) drops to 1400 [a] , (ii) stays at 2700 [b], (iii) shoots to 3600 [c]. " Specified Answer for:a & 50000 Specified Answer for:b & 0 Specified Answer for: ¢ @ -50000
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help