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Unformatted text preview: Assignment 5 Johnson Graduate School of Management Equity Derivatives and Related Products Due on November 2, 2010 Professor Mark Zurack Question 1 A fund manager is looking to change the risk/return characteristics of an equity portfolio she manages. The portfolio closely tracks the S&P 500 index. Her investment horizon is one year. Below is market information you will need to develop a strategy.- Dividend Yield = 2%- One Year LIBOR = 0.9%- One Year S&P 500 50 Delta Implied Volatility = 25%- Spread between 25D puts and 25D calls- 8.4 Volatility Points- Assume S&P 500 Futures are fairly valued and no liquidity shortfall costs on the part of the dealer. Please recommend a specific options strategy for each of the four risk/return scenarios given by the portfolio manager, include the inputs you used in pricing the options. For each strategy, please calculate the minimum manager, include the inputs you used in pricing the options....
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This note was uploaded on 01/25/2011 for the course NBA 6940 at Cornell.