# fm457y12h1 - RECOMMENDED HOMEWORK PROBLEMS 1 INTRODUCTION...

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RECOMMENDED HOMEWORK PROBLEMS 1 INTRODUCTION TO FINANCIAL MATHEMATICS MTH 457-001 SPRING 2012 PROF. G ´ ABOR FRANCSICS D310 WELLS HALL, 353-7962, 1. PROBLEMS from the TEXTBOOK: Chapter 1, p.17, Exercise 1 - 4; Chapter 2, p.31, Exercise 1 - 3; Chapter 3, p.55, Exercise 1 - 9. 2. TRADING STRATEGIES INVOLVING OPTIONS . 1. A call with a strike price of \$60 cost \$6. A put with the same strike price and expiration date costs \$4. What is the graph of the proﬁt function of the straddle created from these options? For what range of the stock prices would the stradle lead to a loss? 2. Three put options on a stock have the same expiration date and strike prices of \$55, \$60, and \$65. The prices of the options are \$3, \$5, and \$8, respectively. Explain how a butterﬂy spread can be created. Construct the proﬁt graph. For what range of the stock prices would the butterﬂy spread lead to a loss? 3. How one can create a forward contract on a stock from options?

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fm457y12h1 - RECOMMENDED HOMEWORK PROBLEMS 1 INTRODUCTION...

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