Team Assignment Cover Sheet
Student Name and number : Jiadong Chen 723912
Student Name and number: Zihan Wang 774089
Student Name and number: Xinying Sui 772144
Student Name and number: Yonquin Leaw 796048
Student Name and number: Ruo Chen 707117
Subject
FNCE 90011 IN CLASS QUESTIONS
QUESTION 1 (Week beg March 6)
Consider a trader on 25 Feb 2017 that takes a bull spread position via a long position in a
March 2017 futures contract traded at $5 and a short position in a June 2017 futures
position traded at
DERIVATION OF MINIMUM VARIANCE HEDGE RATIO
Consider a short nave hedger. The hedged profit or loss ( ) is the sum of the profits/losses
in both markets
( S 2 S1 ) ( F1 F2 )
( S 2 S1 ) ( F2 F1 )
Adjusting this for a hedge ratio not equal to 1 yields
( S
FNCE 90011 DERIVATIVE SECURITIES
GROUP ASSIGNMENT
Questions about this project
No questions about this project may be asked of either academics or teaching assistants. Each
groups solution is to be the work of members of that group only. If the project is
PAYMENT
NUMBER
DATE
PAYABLE
DIVIDEND
RATE
DIP
$ VALUE
PER
SHARE
BSP
NOTIONAL
VALUE
PER SHAR
RATE
OF
IMP.
CRED.
DETERMINATION
DATE
RECORD
DATE
307
30 Mar 1984
27 Apr 1984
30 May 1984
23
10.75
n/a
n/a
308
05 Oct 1984
26 Oct 1984
28 Nov 1984
25
(12.5)pp
9.68
Question 1
Two bonds exist; ANZ is nice.
Bond 1: Two year, 5% (annual) coupon, $1000 par
2.
Bond 2: Two year, 6% (annual) coupon, $1000 par
3.
ANZ lets you borrow or lend at 2% per year
Price of bond 1 = $1000,
Price of bond 2 = $1010,
Are there any a
FNCE 90011 IN CLASS QUESTIONS
QUESTION 1 (Week beg March 6)
Consider a trader on 25 Feb 2017 that takes a bull spread position via a long position in a
March 2017 futures contract traded at $5 and a short position in a June 2017 futures
position traded at
FNCE 90011
Derivative Securities
Lecture Introduction to Futures
Outline
Definition
Specifications of futures contracts
How to open and close a position
Relationship between futures price and spot price
Margins and marking-to-market
Price and trading info
FNCE 90011 DERIVATIVE SECURITIES
GROUP ASSIGNMENT
Questions about this project
No questions about this project may be asked of either academics or teaching assistants. Each
groups solution is to be the work of members of that group only. If the project is
FNCE90011 Derivatives Securities
Solutions to Exercises
Lecture 9
See also the MATLAB file L9_exercises.m for solutions using MATLAB.
Chapter 20
20.3
a. and b.
The formulas are:
DeltaC = N(d1), DeltaP= N(d1).
The calculations are:
T = 44/365 = 0.120548.
d
FNCE90011 Derivatives Securities
Solutions to Exercises
Lecture 1
Chapter 4
4.1
A forward contract is a binding agreement between a buyer and a seller to trade some
commodity at a fixed forward (delivery) price F on the maturity (or delivery) date T
cont
FNCE90011 Derivatives Securities
Solutions to Exercises
Lecture 3
Chapter 12
12.2
The data:
Today is time zero and the forward matures after six months at time T.
BUGs stock price S = $50 today.
BUG pays div = $1 dollar after time t1 = 2 months or 2/12
FNCE90011 Derivatives Securities
Solutions to Exercises
Lecture 4
Chapter 15
15.1
Profit Diagrams for (1) Long and Short Calls and (2) Long and Short Puts
Profit
Profit
Long call
19.25
Long put
23
20
3
0
45
3
S(T)
0.75
0.75
45
S(T)
20
19.25
Short call
19.
FNCE90011 Derivatives Securities
Solutions to Exercises
Lecture 2
Chapter 1
1.2
Some applications of derivatives:
They help generate a variety of future payoffs, which makes the market more complete.
They enable trades at lower transactions costs.
Hedgers
FNCE90011 Derivatives Securities
Solutions to Exercises
Lecture 5
Chapter 17
17.3
a. No, this is not a reasonable description of the stock price process. Over any non-zero time
step, stock prices do not move either up or down to fixed and known values.
b.
Review question
A stock trades for $40. Each 3 months, the stock price can go up or down by 10%.
The risk-free interest rate is 3% per 3 months.
a)
What is the tree of future stock prices?
b)
What is the value of a 6-month European put with strike price $
Practice Questions Lecture 7/8: Solutions
See also:
MATLAB: L7_BSM_examples.m
Thijs van der Heijden
1
FNCE 90011, Semester 2 2016
Practice Question 2
You have a 3-month European call option with strike price $10.50. The current stock price is $10 and
vo
FNCE90011 Derivatives Securities
Solutions to Exercises
Lecture 6
Chapter 18
Also see the MATLAB file L6_multiperiod_binomial_tree.m.
18.2
The calls payoffs at time two (in six months):
Call
Today
3 months
6 months
25.3238 = cUU
?
?
0 = cUD
?
0 = cDD
We c
FNCE90011 Derivatives Securities
Solutions to Exercises
Lecture 7
Chapter 19
See also the MATLAB file L7_BSM_exercises.m for solutions. Sometimes the answers in the MATLAB
file are slightly different from the ones reported here. This is because the result
Solutions to Practice Questions
See also the MATLAB file PracticeQuestions.m
Question 1
a) Use put-call parity with a strike of $40. 1-month: $1.5 + $40/(1+R) = $1.5 + $40 R = 0
2-months: $2.25 + $40/(1+R) = $2 + $40 R = 0.0063.
b) A short butterfly consi