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Unformatted text preview: bp): 2,500 / (1 + 0.1 *(270/360)) = 2325.58 14.a. . The put is in-the-money. If the stock price is below $50, party B may not fullfill its obligation under the terms of the contract than from option counterparty. 15. Party A buys an European call option from party B at a strike price of $50 and pays full premium upfront. . In which of the following situations does party B face counterparty credit risk? a) Stock price is below $50 at expiry b) Stock price is above $50 at expiry c) Party B does not face credit risk Solution: c . Party B does not face counterparty credit risk because party A has paid premium in full. 16. The exposure profile of purchased options tends to be greater than the credit risk for comparable swaps. a. True b. False Solution: a....
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This note was uploaded on 02/27/2010 for the course MA 535 taught by Professor Prasad during the Spring '10 term at Stevens.
- Spring '10