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Summer Final Fin 511 2010

Summer Final Fin 511 2010 - Problem1 S0=100 Su=115 Sd=90...

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Problem 1: S0=100 Su = 115 Price if stock price increases Sd = 90 Price if stock price falls rf = 5.26% Using Binomial Model with two periods: t=0 and t=1: a. Price put (x=110) b. Price call (x=110) c. Prove that the prices calculated are or are not consistent with put-call parity Problem 2: risk-free: 0 per month  Beta 0.3 0.6 0.9 1.2 1.5 -0.3 You have been given the following monthly returns, covariance matrix and expected returns  for the six s Monthly actual returns: Month a b c d e f 1 2.37% 2.15% 1.43% 3.02% 3.91% 1.83% 2 2.94% 3.71% 3.74% 3.90% 4.19% 1.59% 3 2.73% 0.60% 0.24% 0.72% 1.24% 3.03% 4 2.68% 3.33% 6.07% 5.64% 6.76% -0.44% 5 1.32% 1.72% 1.31% 1.16% 0.06% 1.33% 6 1.53% -1.20% 0.13% -1.43% -3.00% 2.06% 7 1.97% 3.54% 4.17% 2.32% 3.10% 0.67% 8 1.77% 2.86% 3.37% 1.65% 3.35% 1.37% 9 2.83% 3.31% 2.17% 2.24% 3.98% 1.97% 10 2.93% 3.77% 5.48% 6.30% 5.73% 1.63% 11 -1.19% -3.51% -3.53% -5.74% -9.46% 2.81% 12 -0.06% 1.42% -0.83% -0.14% -0.94% 2.68%

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Summer Final Fin 511 2010 - Problem1 S0=100 Su=115 Sd=90...

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