Portfolio Performance
Introduction
Complicated subject
Theoretically correct measures are difficult to
construct
Different statistics or measures are
appropriate for different types of investment
d
assignment on options ones like these are also done on the slides.
29. You are attempting to value a call option with an exercise price of $100 and one year to expiration. The
underlying stock pays no
The Greeks
Courtesy of John Hull
Rotman
Delta
Delta of a portfolio is the partial derivative of a portfolio
with respect to the price of the underlying asset.
2
Delta of the Option
Option
price
Slope
Options -2
Intro: Individual Equilibrium
Option valuation: What is the equilibrium price for an option?
In essence, we are interested in market equilibrium prices. It
is, however, easier to understa
Replication and option pricing
Class only
Taken from: Derivatives : The Tools That Changed
Finance
By Phelim P. Boyle & Feidhlim Boyle
No Arbitrage Principle
the no-arbitrage principle:
two investment
In Class Exercises on equity
1. A firm has net income of $1 million with
250,000 shares outstanding with a total
market value of $16 million. What is its
P/E ratio?
XYZ Company has expected earnings
Stock Valuation
Law of one price two assists with the
same risk and the same expected cash
flow should trade at the same price.
Book value =
net assets (liabilities + preferred shares )
value of com
Class exercise March 30
-apr1
Limited time post
. A portfolio consists of 400 shares of stock and 200 calls on
that stock. If the hedge ratio for the call is 0.6, what would be
the dollar change in t
Class exercise 1 options
1
S0 = 100 , two possible outcomes are 120 or 90
interest rate 10% , X= 110 so call is worth 10 or 0,
PV of 90 =81.82 . suppose you leverage and set up
the following portfoli
Performance measure
exercise
What is the Sharpe measure of performance
evaluation for The Carlyte Group?
What is the Treynor measure of performance
evaluation for The Carlyte Group
Calculate the Je
ch 16 answers to ch 16 assign 1
5. The required return is 9 percent. k =
$1.22 (1.05)
+0.05 =.09 =9%
$32.03
6. The Gordon DDM uses the dividend for period (t + 1), which would be 1.05.
$35 =
$1.05
r
16. Suppose that the following factors have been identified for the Canadian economy: the growth rate of
industrial production, IP, and the inflation rate, IR. IP is expected to be 3 percent, and IR 5
Class exercise 1 options
1
S0 = 100 , two possible outcomes are 120 or 90
interest rate 10% , X= 110 so call is worth 10 or 0,
PV of 90 =81.82 . suppose you leverage and set up
the following portfoli
Chapter 14 from text
The following problems are based on questions that have appeared in past CFA examinations.
question 24
1.
A 6 percent coupon bond paying interest annually has a modified duration
Some exercises mix of short answer and
MCQ do in class
1. Suppose that all investors expect that interest rates for the
4 years will be as follows:
What is the price of 3-year zero coupon bond with a
these are from the text problems for review for test II
5.
Jand, Inc. currently pays a dividend of $1.22, which is expected to grow indefinitely at 5 percent. If the
current value of Jand's shares bas