Chapter 16, Problem 1CP

a) Describe the potential returns of the portfolio that is combined with changes in S&P 500 index after 30days.

Summary Introduction

To Determine:

To determine the potential returns of the portfolio that is combined with changes in S&P 500 index after 30days

Introduction:

S&P index gives the index stock market of 500 large public trade stocks of US. This includes the index stock of economy part that are selected by the S&P committee members. To get selected by the committee it should have a market cap of $5.3 billion with the 50% public float. For four quarter years they should have positive earnings along with the liquidity given by the volume and price

b) Discuss the effect on the delta with the hedge ratio of each option as the S&P500 approacheseach level of the potential outcome given in part a.

Summary Introduction

To Determine:

To discuss the effect on the delta with the hedge ratio of each option as the S&P500 approaches each level of the potential outcome given in part a.

Introduction:

S&P index gives the index stock market of 500 large public trade stocks of US. This includes the index stock of economy part that are selected by the S&P committee members. To get selected by the committee it should have a market cap of $5.3 billion with the 50% public float. For four quarter years they should have positive earnings along with the liquidity given by the volume and price

c) Evaluate the each pricing of the following in relation to the data volatility.

Summary Introduction

To Determine:

To evaluate the each pricing of the following in relation to the data volatility

Introduction:

S&P index gives the index stock market of 500 large public trade stocks of US. This includes the index stock of economy part that are selected by the S&P committee members. To get selected by the committee it should have a market cap of $5.3 billion with the 50% public float. For four quarter years they should have positive earnings along with the liquidity given by the volume and price.