Homework%20Assignment%204 - prices ranging from $20 to $60...

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FINA0301 Derivatives Dr. Huiyan Qiu Homework Assignment #4 Due: April 30, Friday, drop in Clive’s box by 6PM If not explicitly indicated, the detail calculation of option price or delta using formula is not required. You can provide the number in a format as follows: C(39.25, 40, 0.30, 0.08, 90/365, 0) = 2.3282 or Δ(39.25, 40, 0.30, 0.08, 90/365, 0) = 0.53107682 (if 8 decimal points is required). 1. Chapter 11: (Using formula explicitly) Suppose XYZ is a non-dividend-paying stock. Suppose S = $100, σ = 40%, δ = 0, and r = 0.06. a. What is the price of a 105-strike call option with 1 year to expiration? b. What is the 1-year forward price for the stock? c. What is the price of a 1-year 105-strike option, where the underlying asset is a futures contract maturing at the same time as the option? 2. Chapter 11: (print-out from your spreadsheet showing your work is required) Consider a bull spread where you buy a 40-strike call and sell a 45-strike call. Suppose S = $40, σ = 0.30, r = 0.08, δ = 0, and T = 0.5. Draw a graph with stock
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Unformatted text preview: prices ranging from $20 to $60 depicting the profit on the bull spread after 1 day, 3 months, and 6 months. 3. Chapter 11: verify the day-3 and day-4 profits on slide #61 for the market-maker. Specify the market-maker’s actions and according cash flows. Keep 8 decimal points for option price and option delta in order to match the investment and profit numbers on the table. 4. Chapter 12: 12.3 (use information from Table 12.8 and those before the table) 5. Chapter 12: 12.6 (use information from Table 12.8 and those before the table) 6. Chapter 12: 12.15 (use information from Table 12.8 and those before the table) Hint: the lease rate (dividend yield) for the oil is not zero but the number implied by the given information. 7. Chapter 13: 13.17 Note: please keep a copy of this last homework assignment in case you do not get it back before the final exam....
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This note was uploaded on 04/26/2010 for the course FIN FIN4160 taught by Professor Prof.chow during the Spring '09 term at CUHK.

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