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Unformatted text preview: A. B. Freeman School of Business MBA Professor Paul A. Spindt Financial Modeling Fall 2007 Third Examination General Directions Submit your solutions to the specific questions below, in an EX- CEL Workbook, electronically to me at firstname.lastname@example.org with a copy to email@example.com. Be sure to include your name on the document as well as on the email. Your EXCEL document should be sufficient, but if you wish to add additional text, you may attach a PDF file containing your comments, explanations, doubts, excuses, or whatever. Your must submit your solutions by 6:00 p.m. on Wednesday, October 10, 2007. Enjoy. Specific Questions 1. The Greeks are measures of sensitivity of option prices to vari- ous parameters. Two important greeks are (a) , which measures the sensitivity of an option price to varia- tion in the price of the underlying asset. For a European call on a non-dividend paying stock, = N ( d 1 ) 1 where N () is the cumulative standard normal distribution function and d 1 is defined as in the Black-Scholes model. (b) , which measures the sensitivity of to variation in the price of the underlying asset. For a European call on a non-dividend paying stock, = N ( d 1 ) S T where N () is the standard normal density function, S is the price of the underlying asset, and is volatility....
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- Spring '08
- Financial Modeling