{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ADMS4503-Assignment2-Sample1

ADMS4503-Assignment2-Sample1 - AP/ADMS 4503 3.0 Derivative...

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

View Full Document Right Arrow Icon
Page 1 AP/ADMS 4503 3.0 Derivative Securities Fall 2009 Assignment #2 Instructions: (1) This assignment is to be done individually . You must sign and submit the standard cover page supplied as the last page of this assignment. (2) This assignment is due in the last class . (3) The work can be typed or handwritten . If it is handwritten and too difficult to read due to messiness and poor handwriting, it will receive zero credit . (4) You must show all details to receive full credit . (5) This assignment contains 5 questions and carries a total of 30 points . Question 1 (5 marks) Potash stock sells at $104 and is not expected to pay any dividend over the next year. The 3-month $100-strike call is selling at $9.93. The risk-free rate is 4% per annum continuously compounded. Options considered here are assumed to be of European style. (a) What is the theoretical price of the 3-month put? (2 marks) (b) The 3-month put is selling at $2.75 in the market. How would you undertake this arbitrage opportunity? Show all details. (3 marks) Question 2 (6 marks) The S&P 500 spot and volatility are 1,087 and 25% respectively. The risk-free
Image of page 1

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

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

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern