Ch15 - Options on Stock Indices and Currencies Chapter 15...

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Click to edit Master subtitle style  7/7/11  Options, Futures, and Other Derivatives,  7th  Options on Stock Indices and Currencies Chapter 15 11
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 7/7/11  Options, Futures, and Other Derivatives,  7th  Index Options (page 317-327) The most popular underlying indices in the U.S. are The Dow Jones Index times 0.01 (DJX) The Nasdaq 100 Index Contracts are on 100 times index; they are settled in cash; OEX is American; the XEO and all other are European 22
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 7/7/11  Options, Futures, and Other Derivatives,  7th  Index Option Example Consider a call option on an index with a strike price of 900 Suppose 1 contract is exercised when the index level is 880 What is the payoff? 33
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 7/7/11  Options, Futures, and Other Derivatives,  7th  Using Index Options for Portfolio Insurance Suppose the value of the index is  S 0  and the  strike price is  K If a portfolio has a  β  of 1.0, the portfolio  insurance is obtained by buying 1 put option  contract on the index for each 100 S 0   dollars  held If the  β  is not 1.0, the portfolio manager  44
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 Options, Futures, and Other Derivatives,  7th  Example 1 Portfolio has a beta of 1.0 It is currently worth $500,000 The index currently stands at 1000 What trade is necessary to provide insurance against the portfolio value falling below $450,000? 55
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This note was uploaded on 06/26/2011 for the course BUS 316 taught by Professor N/a during the Spring '09 term at Simon Fraser.

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Ch15 - Options on Stock Indices and Currencies Chapter 15...

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