The following market information will be used for this problem.TodaySpot (S/unit)Volatilityrisk-free interest rateDividend yleldMay 1, 20219818.00%2.00%0.00%You sell 8,000 European call options with a strike of 93 and maturity July 6, 2022 at fair value.Option information for a variety of stock prices are:Spot Price Option Price Option Delta % Option Delta Shares64.8344X66,7796X6৪.6613४70.4772%172.2256%10.15166910.80979111.48704996-5,187-5,3425,493-5,638-5,77897989910012.18279712.896368Note, the current stock price is in the middle of the table.To hedge your position, how many shares do you buy or sell? Assume you can only trade a whole number ofshares.The market moves to 96. You re-balance your delta hedge by buying or selling how many shares?The market moves back to 98. You re-balance your delta hedge by buying or selling how many shares?How much money have you made or lost on your overall position?

Delta hedging is the strategy of options trading used to cover the risk of change in the price of…

Answered: The following market information will…

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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Calculate the upper and lower bounds for the price of a 4-month European call option on a non-dividend-paying stock when the stock price is $28, the strike price is $25 and the risk-free rate is 8% p.a. compounded continuously. '0
Suppose that on 27 October 2022, Wall Street Journal in New York presents the following price for 27 March 2023 call options on Microsoft stock (in $ USA) strike 75 80 85 price 11 7.96 5.5 while the annual interest rate is 4% per year. On this date (27 October 2022) the Microsoft stock was trading at $81.625. Suppose we decide that the volatility of the market is 30%. Should you buy the call option as the European one with strike price $80? Justify your answer.
please show how the amount of stock and the amount borrowed is calculated Answer in typing
Consider the call-put pair with strike price 407 and February maturity. Use the put-call parity formula to compute the price of a zero-coupon bond expiring in February. Use the data in Table 2. Please show your calculations. Discuss your result. You also observe the following market for European Call and Put options on the S&P 500 ETF: Today: 10th January 2023 Spot index level: 407 see image attached
In a financial market a stock is traded with a current price of 50. Next period the priceof the stock can either go up with 30 per cent or go down with 25 per cent. Risk-freedebt is available with an interest rate of 8 per cent. Also traded are European optionson the stock with an exercise price of 45 and a time to maturity of 1, i.e. they maturenext period.i) Find prices of Arrow-Debreu securities.ii) Calculate the price of a call option by constructing and pricing areplicating portfolio.
Assume a stock price of $31.18, risk-free rate of 3.6 percent, standard deviation of 44 percent, N(₁) value of .62789, and an N(d₂) value of .54232. What is the value of a three-month call option with a strike price of $30 given the Black-Scholes option pricing model? Question 9 options: $3.38 $3.99 $3.68 $1.76 $3.45
Vijay
Consider the prices of the following three Treasury issues as of February 24, 2021: Maturity Bid Change Yield -15 5.34 May 2025 May 2025 Ask 118:16 118:18 103:16 103:18 134:20 134:26 -5 5.30 May 2025 -15 5.38 Coupon 6.920 8.370 12.180 The bond in the middle is callable in February 2022. What is the implied value of the call feature? (Hint: Is there a way to combine the two non-callable issues to create an issue that has the same coupon as the callable bond?) (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Call value GA 19.41
(a) The table below gives information about European options with a maturity date of 6 months. Type Of option Strike Price Call 65 Call 58 Put 65 Premium 5 8 4 (i) Devise the payoff profile of the hedging strategy from the above for an investor betting on an increase in the stock price and calculate the payoff if the stock price increases to $66 after 6 months. (8 marks) (ii) Suppose that another investor expects a big stock price movement but is not sure of the direction. She however bets that the downward movement is more likely. Devise the corresponding trading strategy and calculate the payoff if the stock price is $55 after 6 months. (8 marks) (b) By analysing the pay off profiles of a protective put strategy and a straddle, discuss in what ways these strategies shield the investor from potential losses.
Market Data Risk-Free Rate (Annualized) 0.025 Vokinar Corporation Stock Price $55.00 Dividend Yield 0.03 Standard Deviation 0.45 Exercise Price $50.00 Maturity (Years) 0.25 Required: Using the Black-Scholes option pricing formula and the data above, please calculate the price of the European call and put for this share of stock. (Use cells A3 to B10 from the given information to complete this question.) Vokinar Corporation d1 d2 N(d1) N(d2) Call Price Put Price
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Back Open in Safa Consider a stock with a volatility of its logarithm of =0.2. The current price of the stock is $88 and it pays no dividends. Find the option prices on this stock that has an expiration date 4 months from now and a strike price of $90. The current interest rate is 15% compounded monthly. (Write the answers with two decimal places. x.yz) European call option premium European put option premium = $4 Home Courses Tasks Calendar Messages Back Open in Safa European put option premium =| American call option premium = 24 American put option premium = %24 %24

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