1. What is the gamma of the option,

Q: What are the assumptions of efficient market hypothesis? Discuss.

A: The efficient market hypothesis (EMH) is a hypothesis theory which states that share prices reflect…

Q: What are the components of the risk-free rate?

A: risk free asset: it is the asset which does not carry any risk.

Q: Define the term Risk-free real return?

A: Risk-free real return is a hypothetical number that mirrors the foreseen return on a venture that…

Q: How widely used is real option analysis?

A: Real option analysis is the analysis of a company’s opportunity cost of an investment or a…

Q: what is the difference between a call option and a put option?

A: There are two types of options one is call option and other is put option and both are derivative…

Q: Describe about the Option-pricing models?

A: The option pricing model utilizes factors (stock value, exercise price, volatility, interest rate,…

Q: What is the horizon value? Why is it also called the terminal valueor continuing value?

A: Horizon value is the value of the expected dividend that will be received after the horizon date.

Q: What outcomes are possible with speculative risk?​

A: Speculative risk is a form of risk in which the outcome is unknown and there is a chance of both…

Q: Mathematically, what does the beta value represents the _____________ of the market line

A: Beta (β) represents the slope of the security market line (SML).The security market line is a…

Q: What does it mean when you have a risk-free guaranteed rate? Give an example as well as the…

A: Theoretically, an investor anticipates a return of no less than the risk-free rate on any investment…

Q: How do you calculate a weighted beta?

A: In portfolio there are number of stock present in portfolio. We have to calculate weight of each…

Q: What is future value, FV?

A: Future Value: The future value is the value of the present amount compounded at an interest rate…

Q: Explain prime rate

A: Introduction: Usually an interest rate is the amount that a lender pays calculated as a percentage…

Q: What is the maximum value that a call can take? Why? Explain which option (i.e. put or call)…

A: Options are of 2 types:1) Call Option2) Put Option

Q: State the decision criteria for each of the following. (2)

A: Decision Rule: Profitbaility Index (PI): Greater than one is acceptable NPV: Project is…

Q: In a binomial tree model of a put option, why is the value of the upper node always 0 and in a call…

A: The binomial tree model is a simplified method used in option pricing, where the price of the…

Q: An exponential probability distribution

A: The correct answer is: (C) is a Continuous distribution. An exponential probability distribution is…

Q: What impact does each of the followingparameters have on the value of a call option?(4) Risk-free…

A: An agreement where the holder has a right to purchase or sell the shares at a specific price at a…

Q: You agree to purchase a new vehicle from a car dealer for $36,000, and you want them to finance your…

A: The month to month installment speaks to the settled sum a borrower concurs to pay to the bank each…

Q: What are the assumptions of Option-pricing models?

A: There are two option pricing models they are: Binomial model option pricing model Black Scholes…