prob set 2 answers

prob set 2 answers - 95 3. A+B Futures Expiration Dated...

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Options Problem Set 2 Josh Marcus Prof. Brenner 10/07/09 F = SE ^ (r-d)t S&P 500 (SPX) index –1515.96 (December 10, 2007) 1515.96 Futures Expiration Dated 12/21/2007 3/20/200 8 Futures Settlement 1519 1529.1 Expiration (in days) 11 69 Expiration (annual) 0.030 0.189 Expected Dividend Yield 1.14 1.88 Risk Free Rate (Euro $) 5.1300 5.1100 r-d 0.03990 0.03230 (r-d)(t) 0.00120 0.00611 e^(r-d)(t) 1.0012 1.0061 Fair Value 1517.78 1525.25 Transaction Costs 1.16 1.16 Buy Program (Sell Futures) 1518.94 1526.41 Sell Program (Buy Futures) 1516.62 1524.09 Futures Expiration 9/18/2009 12/18/20 09 Basis Implied C.O.C 0.066 0.046 Implied r 7.787 6.445 Calander Spreads March/ Dec Actual Spreads 10.1 Fair Value 7.47 Implied ForwaRD Interest Rate 5.208599 8 0.120246575
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1. Fair Value Futures Expiration Dated 12/21/2007 3/20/2008 Fair Value 1517.78 1525.25 2. Futures Expiration Dates 9/18/2009 12/18/20 09 Basis Implied Cost of Carry 0.0664739 0.045653 699 Implied r 5.5073865 2.685369
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Unformatted text preview: 95 3. A+B Futures Expiration Dated 12/21/2007 3/20/2008 Buy Program (Sell Futures) 1518.94 1526.41 Sell Program (Buy Futures) 1516.62 1524.09 C. The Arbitrage Opportunity here is to sell the March Futures Short and hedge by buying the index. 4. What is the calendar-spread fair value? Compare it to the actual value. Calander Spreads March/December Actual Spreads 10.1 Fair Value 7.47 5. What is the implied forward rate? 6. What is the main difference between current (August 2009) FVs (see the class example) and the Dec. 2007 FVs? What is the main reason for this difference? The current FVs are below the spot rate whereas in Dec 07 the spot rate was below the FV of the futures contracts. This is a result of low interest rates which resulted in near zero/ negative cost of carry....
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prob set 2 answers - 95 3. A+B Futures Expiration Dated...

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