answers Quiz 3 - 1)

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1)  Part A) What is the alpha of a derivative which has cubic payoffs, and whose underlying  is a stock w/ an alpha of 4: _________   (4/3) Part B) What is the alpha of a portfolio with two stocks, A and B, with respective alphas  of 3 and 4: _________   (3) 2) As you increase the number of convolutions, please select the distribution you approach  for each scenario: combining Binomial Distributions combining Student T-distributions (1 df) a. Normal Distribution Normal Distribution b.  Normal Distribution Levy-Stable Distribution c. Levy-Stable Distribution Normal Distribution d. Levy-Stable Distribution Levy-Stable Distribution 3) Having sold short a particular stock (Stock A), you find yourself in the fourth quadrant.  How do you “clip” your exposure to fat tails? a. buy Treasury Bills b. sell out-of-the-money call options on Stock A c. add a short position in Stock B to your portfolio
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/05/2010 for the course FINANCE AN FRE6041 taught by Professor Taleb,nassimn during the Spring '09 term at NYU Poly.

Page1 / 3

answers Quiz 3 - 1)

This preview shows document pages 1 - 2. Sign up to view the full document.

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