Quizz1Ans(4) - Financial Risk Management Exercises Jos Da...

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Financial Risk Management Exercises. Jos´ e Da Fonseca email: [email protected] Auckland University of Technology First Name: Family Name: Id Number: Exercise I (10 marks) 1. (6 marks) We suppose that the stock today is equal to S 0 = 10. You take a long position on 3 calls. Each call has a strike of K = 11 . 5 and a maturity of T = 1. The price of one call is C = 1 . 1. You write (i.e. sell) 2 puts. Each put has a strike of K = 9 . 5 and a maturity of T = 1. The price of one put is P = 0 . 9. 1. What is your global position at time T if the stock is equal to S T = 14? (3 marks) You exercise the options so you get 3(14 - 11 . 5) = 7 . 5. The put is not exercised (your counterparty does not exercise the option), so you end with 7 . 5 - 3 * 1 . 1 | {z } price paid for the calls + 1 . 8 |{z} received for selling the put = 6 (1) 2. What is your global position at time T if the stock is equal to S T = 10 . 5? (3 marks) You do not exercise the options so you get 0.0 from the call options. The put is not exercised (your counterparty does not exercise the option), so you end with 0 - 3 * 1 . 1 | {z }
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