Assignment 2 - exposure. The starting point to measure...

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Assignment 2 Johnson Graduate School of Management Due on September 21, 2010 Professor Mark Zurack Question 1 You are a hedge fund and are very bearish on AAPL. You are presented with the following alternatives to create a bearish position on AAPL: a) Sell 100,000 shares short for $260. The rebate you would receive on AAPL equals 0.2% per year. AAPL pays no dividend. You expect to hold the position for three months. b) Enter into an Equity Swap contract with the following terms: Hedge Fund Pays – Total return on AAPL over the next three months on 100,000 shares of
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Unformatted text preview: exposure. The starting point to measure return equals $260 Hedge Fund Receives - $25,000 in cash Which transaction would you prefer and why? Question 2 a. Which client base was the driving force behind the ISE? What benefit did they feel an electronic exchange would provide? b. Did other options clients support the ISE? Why? c. What is the cross listing of options? Did the ISE accelerate the process of cross-listing? d. What is the OCC? Why is it important to the success of the options business? How does it differ from the clearing process in the futures market? 1...
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