# ica8 - Name Agfagﬂ Kg 2 UNIVERSITY OF ILLINOIS AT...

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Unformatted text preview: Name: Agfagﬂ Kg 2 UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN Department of Mathematics ACTUARIAL SCIENCE PROGRAM Math 476 / 567 Prof. Rick Gorvett Actuarial Risk Theory Fall, 2010 In—Class Assignment # 8 (4 problems worth l/2-p0int each) Tuesday, November 9, 2010 This assignment is open—book, open-note, and you may work together in groups of no more than 4. Each student must hand in her/his own answer sheet. Please circle your ﬁnal answers. A share of stock has the following prices at the end of each of the next 4 months: Price at end of month 1: 52 Price at end of month 2: 44 Price at end of month 3: 46 Price at end of month 4: 54 You have the following hypothetical 4—month options on this share of stock: A. 50-strike plain-vanilla European call option. 4 B. 50-strike arithmetic-average—price put option. \ C. SO-strike lookback put option. 6 D. 50—strike down-and—out 45—barrier call option. 0 E. Arithmetic—average—strike lookback call option. 4’ Assume that each option can only be exercised at the end of month 4. For each of the payoffs at the end of month 4 below, identify the letter associated with the hypothetical option that would have that payoff value. (1) Payoff=0 -) Option: 3) (2) Payoff =1 -) Option: B (3) Payoff = 5 9 Option: g (4) Payoff = 6 9 Option: g 1 an, .- wmmrrwmﬁﬁfxfmﬁmﬁmwk\¥1w,\t\v.\~r;yuutv: mm l? g % mmuwmmmw {wemwmmrmmmmmwwumt E , t % E a g 6% a is é g 'é :: ( ...
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