2 - THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301CDE - DERIVATIVES First Semester, 2009-2010 Tutorial 2 Problem Set – Chapter 3 c Practice Questions Question 1 (Bull and Bear Spread) Suppose that put options on a stock with strike prices $30 and $35 cost $4 and $7 respectively. (a) How can the options be used to create (i) a bull spread and (ii) a bear spread? (b) Construct a table that shows the profit and payoff for both spreads. Question 2 (Bull Spread) Construct a table showing the payoff from a bull spread when puts with strike prices K 1 and K 2 , with K 2 > K 1 are used. For Question 3-5 , assumed the following: Effective 6-month interest rate: 2% S&R 6-month forward price: $1020 Premiums for S&R options with 6 months to expiration: Strike (K) Call Put $950 $120.405 $51.777 1000 93.809 74.201 1020 84.470 84.470 1050 71.802 101.214 1107 51.873 137.167
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
FINA0301 – Tutorial 2 Mr. Clive Man Chung HO 2 *We will go through these questions during tutorial. Question 3*
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/26/2010 for the course FINA 2802 taught by Professor Xia during the Fall '09 term at HKU.

Page1 / 3

2 - THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online