FINA 0301/2322B/C: Derivatives
Review questions 1, Fall, 2014
1. Which of the positions can result in the following prot diagram?
Prot
d
d
d
d
d
d
d
d
d
Stock price
d
d
(a) Buy one low-strike call, sell two high-strike calls.
(b) Buy one high-strike call,
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FACULTY OF BUSINESS AND ECONOMICS
FINA0301/2322E/F DERIVATIVES
SECOND SEMESTER, 2013-2014
Tutorial 3 Chapter 5 Financial Forwards and Futures
Tutorial 2
Question 6 (Cont. with Chapter 4 - Collar)
Auric Enterprises is using gold
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FACULTY OF BUSINESS AND ECONOMICS
FINA0301/2322 DERIVATIVES
2014 2015
Tutorial 4 Chapter 5 Financial Forwards and Futures
Question 1 (Cash and Carry Arbitrage)
The S&R index spot price is 1100, the risk-free rate is 5%, assumin
THE UNIVERSITY OF HONG KONG
FACULTY OF BUSINESS AND ECONOMICS
FINA0301/2322 DERIVATIVES
2014-2015
Tutorial 7 Chapter 7 & 8 Interest Rate Forwards, Futures and
Swaps
Question 1 (Implied Forward Rate Sample Exam)
Suppose that the yields on 1-year zero coupo
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FACULTY OF BUSINESS AND ECONOMICS
FINA0301/2322 DERIVATIVES
2014-2015
Tutorial 2 Chapter 3 Insurance, Collars and Other Strategies
For the following problems, assume the following:
Effective 6-month interest rate: 2%
S&R 6-mont
Chapter 2 An Introduction to
Forwards and Options
Faculty of Business and Economics
University of Hong Kong
Dr. Tao Lin
Chapter Outline
Basic derivatives contracts
Forward contracts
Call options
Put options
Types of positions
Long / Short position
Graphic
Chapter 5
Financial Forwards and Futures
FINA0301/2322 Derivatives
Faculty of Business and Economics
University of Hong Kong
Dr. Tao Lin
Chapter 5 Outline
Financial forwards on stocks and indexes
Pricing, hedging, arbitraging
Futures contracts:
Margins an
Chapter 1
Introduction to Derivatives
Faculty of Business and Economics
University of Hong Kong
Dr. Tao Lin
Chapter Outline
What Is a Derivative?
Uses of Derivatives
Financial Markets
Buying and Short-Selling Financial Assets
2
What is a Derivative?
Uses
FINA0301GH | FINA2322GH
Spring Semester, 2015
Derivatives
School of Economics and Finance
The University of Hong Kong
Notes on homework assignments:
Students should form groups of four to five members to work on the assignments together. Group
switching i
FINA0301GH | FINA2322GH
Spring Semester, 2015
Derivatives
School of Economics and Finance
The University of Hong Kong
Notes on homework assignments:
Please state clearly the names and UIDs of each member on the first page of the assignment.
Homework Assig
4/26/2014
1
2
Black-Scholes Formula
The Black-Scholes option pricing model assumes that the
terminal distribution of the stock price is described by a
lognormal distribution
That is, the logarithms of stock price follows a normal
distribution
The value
4/16/2014
1
2
Binomial Option Pricing Model
Pricing Option using Binomial Model
Two Methods:
(1) No Arbitrage Principle (by replicating portfolio:
shares + Bond)
FINA0301/2322 - Derivatives
(2) Risk-Neutral Pricing (both method will give the
same answer)
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SECOND SEMESTER, 2013-2014
Tutorial 8 Suggested Solutions Chapter 9
Question 1
(a) We can
use put-call-parity to determine the forward price:
(b) Given
the forward
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FACULTY OF BUSINESS AND ECONOMICS
FINA0301/2322 DERIVATIVES
2014-2015
Tutorial 7 Chapter 9 Parity and Other Option Relationships
Question 1 (Currency Options)
The price of a 6-month dollar-denominated call option on the euro wi
THE UNIVERSITY OF HONG KONG
FACULTY OF BUSINESS AND ECONOMICS
FINA0301/2322 DERIVATIVES
2014-2015
Tutorials 5 & 6 Chapter 7 & 8 Interest Rate Forwards and Futures;
Swap
Question 1 (Forward Rate Agreement)
Suppose that in order to hedge interest rate risk
Chapter 12
The Black-Scholes Formula
Multiple Choice
1.
What is the price of a $35 strike call? Assume S = $38.50, = 0.25, r = 0.06, the stock pays no
dividend and the option expires in 45 days?
(a) $3.50
(b) $3.65
(c) $3.80
(d) $3.95
Answer: D
2.
What is
Chapter 11
Binomial Option Pricing: II
Multiple Choice
1.
Consider a two-period binomial model, where each period is 6 months. Assume the stock price is
$46.00, = 0.28, r = 0.06 and the dividend yield is 2.0%. What is the maximum approximate strike
price
Chapter 10
Binomial Option Pricing: I
Multiple Choice
1.
A stock is currently selling for $22.00 per share. Ignoring interest, determine the intrinsic value of
a call option should there exist equally probable stock prices of $25.00 and $23.00.
(a) $0.00
Chapter 9
Parity and Other Option Relationships
Multiple Choice
1.
Jafee Corp. common stock is priced at $36.50 per share. The company just paid its $0.50 quarterly
dividend. Interest rates are 6.0%. A $35.00 strike European call, maturing in 6 months, se
Chapter 7
Interest Rate Forwards and Futures
Multiple Choice
1.
The price of a 3-year zero coupon government bond is 85.16. The price of a similar 4-year bond is
79.81. What is the yield to maturity (effective annual yield) on the 4-year bond?
(a) 4.6%
(b
Chapter 5
Financial Forwards and Futures
Multiple Choice
1.
KMW, Inc. plans to pay a dividend of $0.50 per share both 3 and 6 months from today. KMWs
share price today is $36.00 and the continuously compounded quarterly interest rate is 1.5%. What is
the
FINA 0301/2322H: Derivatives
Review questions 2, Fall, 2014
1. Suppose that the annual interest rate is 4.88 percent in the United States and 3.44 percent in
Germany, and that the spot exchange rate is $1.12/e and the forward exchange rate, with oneyear m
THE UNIVERSITY OF HONG KONG
FACULTY OF BUSINESS AND ECONOMICS
FINA0301/2322 DERIVATIVES
2014-2015
Tutorial 10 Chapter 10 & 12
Chapter 10
Question 1 (Put-call Parity)
Consider a one-period binomial model with h = 1, where S = $100, r = 0.08, = 30%,
and = 0
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FACULTY OF BUSINESS AND ECONOMICS
FINA0301/2322
2014 2015
Tutorial 3 Chapter 4 Introduction to Risk Management
For Question 1-6, assume the following:
Consider the following three firms:
XYZ mines copper, with fixed costs of $0
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SECOND SEMESTER, 2013-2014
Tutorial 7 Chapter 3 Insurance, Collars and Other Strategies
For the following problems, assume the following:
Effective 6-month interest
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Tutorial 4 Chapter 6 Eurodollar Futures Contract
Question 1 (Eurodollar Futures)
Following is the Eurodollar futures prices in June 2012.
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Homework Assignment 2 Suggested Solutions
Question 1 (10 points)
(a)
We use the continuously compounded interest rate and the time to exp