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Problem set 9
Problem: 1
|
Option |
Strike Price (X) |
Stock Price (S) |
Value |
Remarks |
Cost |
Profit |
|
Call |
58 |
$80 |
$22 |
S-X |
11.47 |
$10.53 |
|
Pull |
58 |
$80 |
$0 |
S > X, Nil |
8.32 |
($8.32) |
|
Call |
62 |
$80 |
$18 |
S - X |
9.76 |
$8.24 |
|
Pull |
62 |
$80 |
$0 |
S > X, Nil |
10.54 |
($10.54) |
Problem:
2
|
Short Stock |
$30 |
|
Write Put |
$4.10 |
|
Strike Price |
$33 |
|
Buy Call |
$6.60 |
|
Strike Price |
$24 |
|
Time to Maturity |
1 |
Assuming the above stated
information If market price goes beyond $33 then:
|
Put Written Inflow |
3.1 |
|
Buy Call Inflow |
2.4 |
|
Total Inflow |
$1.50 |
|
Outflow |
$4 |
While if market price goes
below $24 then:
|
Short Stock Outflow |
$7 |
|
Unexercised Put |
$4.10 |
|
Unexercised buy call |
$6.60 |
|
Total Inflow |
$4.50 |
Problem: 3
The common stock of a firm A
has been trading in a narrow range around $20. If the stock strike price is limited
to 1.02 then
|
C |
1.02 |
|
T |
3 |
|
S_0 |
20 |
|
K |
20 |
|
rf |
1% |
Using Put call parity option
Problem set 10
Problem: 1
The positions that we will put in stock and T-bills to replicate the payoff of a European call option with K = $26 and maturing in 6 months. The change of price to $30 increase and $20 decrease will be following
Problem: 2
a)
The Binominal
tree
Problem: 3
Problem: 4
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