the initial Stock Price S Slo)=$50, Strike price is k=$50, interest10 Rnd the values of the European CAl ard put options, CE (0) and Pe10); if孫the initial Stock Price is Slo)=f50, Strike prceK=$50, interestAcE IsrE 5%%, volatilityis 3=10% and maturitH is T=4 years.S1o)=50K =50In ( NT=0.05)こ Dに05+2=0. 10o.lo 54+T(x_T=4/2)'/250.10 )Kr-= In ()0.10 S4

Options give the buyer the right to purchase but not the obligation to execute the contract. The…

10 Find the vAlues of the European CAII ard put options, CE(5) and PEi0), if the initial Stock Price iS Slo)=#50, Strike Price is ks$50,intorest Tate isr 5%, volatility s 8= (0% and maturity js TE4 gewo. Sto)= 50 K =50 T=0.05 こ Ovdt 3=0. 10 o. lo S4 る=o T=4 = In (용) (.oS - o.10 54.

10 Find the vAlues of the European CAII ard put options, CE(5) and PEi0), if the initial Stock Price iS Slo)=#50, Strike Price is ks$50,intorest Tate isr 5%, volatility s 8= (0% and maturity js TE4 gewo. Sto)= 50 K =50 T=0.05 こ Ovdt 3=0. 10 o. lo S4 る=o T=4 = In (용) (.oS - o.10 54.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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5. Explain and give appropriate use of the following option trading strategies along with their Payoff.: a. Spreads b. Straddles c. Strangles d. Covered Call and Protective Put. State Put-Call Parity theorem for European options. European put and call options with a strike price of Rs. 24 and expiry in 6-months are trading at Rs. 5.09 and Rs. 7.78, respectively. The current stock price is Rs. 20.37 with a risk-free interest rate continuously compounding equal to 7.48%. Is there an arbitrage opportunity? How can it be exploited?
38. Suppose a stock is currently trading at $50. The risk-free rate is 2%. Consider the following two ending states for a one-period binomial option pricing model State Up Stock price 60 Down 40 What is the value of a call option with a strike price of 45? *a. $8.08 b. $5.17 c. $14.71 d. $7.35 e. $9.36 Factor Increase/Decrease .2 .2
Consider the following options on stock X: Option Delta Gamma Vega A 0.5 2.2 1.8 В 0.8 0.6 0.2 C -0.40 1.3 0.7 D 0.70 1.8 1.4 A bank is long 1000 units of Option A, short 200 units of Option B, short 2000 units of Option C, and short 500 units of Option D. The following two options are also available in the market: Option Delta Gamma Vega E 0.6 1.5 0.8 F 0.1 0.5 0.6 a) Design one strategy that would make the bank's portfolio delta neutral. b) Design one strategy that would make the bank's portfolio delta and gamma neutral. Explain why this strategy provides a better hedge with respect to changes in the price of stock X than the strategy you constructed in part (a). c) Design one strategy that would make the bank's portfolio delta, gamma, and vega neutral.
A stock is trading at $300 per share and a call option with strike $300 is priced $10 per share. If hedge ratio is 0.4, what's the call option elasticity? A. -20 B. -18 C. 15 D. 12
Please solve ii
Problem 6-1 Financial Pages (LO1) Consider the table given below to answer the following question. Maturity Coupon Bid Price Asked Price Chg Asked Yield toMaturity (%) 15-02-2020 1.375 98.3281 98.3438 − 0.0078 2.228 15-02-2021 2.25 99.5781 99.5938 0.0313 2.391 15-02-2025 7.625 130.6719 130.6875 0.1094 2.770 15-02-2029 5.25 121.8516 121.9141 0.2344 2.908 15-02-2036 4.5 120.9063 120.9688 0.5313 2.986 15-02-2041 4.75 127.2422 127.3047 0.6641 3.084 15-02-2048 3 97.2656 97.2969 0.7266 3.140 a. What is the current yield of the 2.25% 2021 maturity bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Data: S0 = 120; X = 126; 1 + r = 1.05. The two possibilities for ST are 150 and 102. Required: a-1. The range of S is 48 while that of C is 24 across the two states. What is the hedge ratio of the call? Note: Round your answer to 2 decimal places. a-2. Calculate the value of a call option on the stock with an exercise price of 126. (Do not use continuous compounding to calculate the present value of X in this example because we are using a two-state model here; the assumed 5% interest rate is an effective rate per period.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
M6
When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 5%, the volatility is 20% and the time to maturity is 3 months which of the following is the price of a European put option on the stock? N(.) denotes standard normal distribution values. O 20N(-0.1)-20N(-0.2) 20N(-0.2)-20N(-0.1) O 19.7N(-0.2)-20N(-0.1) O None of these O 19.7N(-0.1)-20N (-0.2)
5. A stock index is currently trading at 50.00. The annual index standard deviation is 20 percent. Paul Tripp, CFA, wants to value two-year index options using the binomial model. To correctly value the options, he needs the formulas in Exhibit 1. The annual risk-free interest rate is 6 percent. Assume no dividends are paid on any of the underlying securities in the index. Exhibit 1. e-D U = e = 1.2214 d==- π₂ where e 1.06184 U-D Where: U = up movement factor D = down movement factor T = probability of an upward price movement

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