Assignment 4

Assignment 4 - Assignment 4 Johnson Graduate School of...

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Assignment 4 Johnson Graduate School of Management Equity Derivatives and Related Products Due on October 19, 2010 Professor Mark Zurack Question 1 Price 3 Month  50D Vol 12 Month  50D Vol 25 Delta Put/Call Spread for All  Maturities Dividend  Yield 1,150 22 25 8.4 2.0% GE 16.4 29 34 9.0 2.9% Assume that 3 month LIBOR is at 0.3%, 12 month LIBOR is at 0.8%, GE pays a rebate of LIBOR minus 15  bps and dealers typically finance GE stock at LIBOR plus 10 bps, and the expected execution shortfall for  trading GE depends on the number of shares traded according to the following schedule: Under 100,000 shares – 10 bps 100,000 – 500,000 shares – 20 bps Please price the following: a) b) 1,000 9 month puts on GE struck at 16 (customer is buying) Question 2 An Equity Linked Note is being offered with the following terms:
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This note was uploaded on 01/25/2011 for the course NBA 6940 at Cornell.

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Assignment 4 - Assignment 4 Johnson Graduate School of...

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