Chapter 6 Homework Solution 1.
2.
4.
7.
8.
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16.
17.
18. In problem 17, we reduced the portfolios duration to zero. To only reduce it to 3.0, you would only use a fraction of the above contracts.
Properties of Stock Options Properties
Chapter 9
Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 2008
1
Notation
c : European call option price p : European put option pri
Credit Derivatives Credit
Chapter 23
Options, Futures, and Other Derivatives 7th Edition, Copyright John C. Hull 2008
1
Credit Default Swaps Credit
A
huge market with over $40 trillion of notional pri
Chapter 2 Homework Solution 3. There will be a margin call when $1000 has been lost from the margin account. This will occur when the price of the silver futures contract increases by 1000/5000 $0.20.
Chapter 7 Homework Solution 1. Co. A has CA in fixed Co. B has CA in floating Borrow where the CA is and swap Gains-to-Trade = 90 bps: 10 for the bank and 40 for each company Co. A should net LIBOR 0.
Chapter 8 Homework Solution 1. Breakeven at ST = 40 3 = $37 Profitable for ST < $37 Exercised if ST < $40 (0,37) (40,-3) (,-3) 2. Breakeven at ST = 50 + 4 = $54 Profitable for ST < $54 Exercised if ST
Chapter 9 Homework Solution 2. c S 0 Ke rT = 28 25e 3. p Ke rT S 0 = 15e 7. p = c + Ke rT S 0 = 1 + 20e 9. c S 0 Ke rT = 80 75e 10. p Ke rT S 0 = 65e 11. c S 0 D Ke rT = 64 0.80e Buy the call (-$5) Sh