Chapter 26, Problem 13PS

Summary Introduction

(a)

To calculate:

The average value, the standard deviation, and sharpe ratio over the 10-year period i.e. $\text{October}1977-\text{September }1987$ .

Introduction:

Sharpe ratio is a ratio which helps in computing the reward-to-volatility ratio. In simple terms, it is the return earned in excess of the risk free rate and divided bt standard deviation.

Summary Introduction

(b)

To calculate:

The average value and the standard deviation, and sharpe ratio over the 10-year period i.e. $\text{October}1977-\text{September }1987$ with an extension of one month to include in calculation i.e. $\text{October }1987$ .

Introduction:

The put options are those type of options in which the expectation is of price fall of that stock. The writer of put options earn gain on these from the excess of strike price over stock price.

Summary Introduction

(c)

To detemine:

The observation about the risk for funds doing options and evaluation of performance of such funds.

Introduction:

Sharpe ratio is a ratio which helps in computing the reward-to-volatility ratio. In simple terms, it is the return earned in excess of the risk free rate and divided bt standard deviation.