The S&P 500 is currently at 2888. The CBOE far-term VIX (^vif) is at 13.15, and the one-year LIBOR rate is 2.75%. Assuming that the far-term VIX is the right volatility for one-year options, what is the value of a derivative that pays off $1000 if the S$P 500 is above 2900 one year from today? Assume the dividend yield for the index is 1% per year.
The S&P 500 is currently at 2888. The CBOE far-term VIX (^vif) is at 13.15, and the one-year LIBOR rate is 2.75%. Assuming that the far-term VIX is the right volatility for one-year options, what is the value of a derivative that pays off $1000 if the S$P 500 is above 2900 one year from today? Assume the dividend yield for the index is 1% per year.
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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Transcribed Image Text:The S&P 500 is currently at 2888. The CBOE far-term
VIX (^vif) is at 13.15, and the one-year LIBOR rate is
2.75%. Assuming that the far-term VIX is the right
volatility for one-year options, what is the value of a
derivative that pays off $1000 if the S$P 500 is above
2900 one year from today? Assume the dividend
yield for the index is 1% per year.
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