Barnard College
Department of Economics
Financial Economics
ECON V3025
Rajiv Sethi
Phone: (212) 854 5140
Fall 2015
2 Lehman
[email protected]
Problem Set 2
Due Date: Monday, October 12
1. Consider three bonds X, Y , and Z, each of which pays $1000 if it
Homework 6
1.
The put-call parity equation states that + 0 = +
Financial Economics
(1+ )
The reason the equation cannot in general be violated is that deviations from it lead to
arbitrage. One of these arbitrage strategies (if the right hand side is great
Barnard College
Department of Economics
Financial Economics
ECON V3025
Rajiv Sethi
Phone: (212) 854 5140
Fall 2015
2 Lehman
[email protected]
Problem Set 4
Due Date: Monday, November 16
1. Using the data you obtained for Problem Set 3, estimate the risk
Barnard College
Department of Economics
Financial Economics
ECON V3025
Rajiv Sethi
Phone: (212) 854 5140
Fall 2015
2 Lehman
[email protected]
Problem Set 5
Due Date: Monday, December 7
1. Obtain data from the Treasury on the yields of 1, 2, 3, and 5 year
Barnard College
Department of Economics
Financial Economics
ECON V3025
Rajiv Sethi
Phone: (212) 854 5140
Fall 2015
2 Lehman
[email protected]
Problem Set 3
Due Date: Monday, October 26
1. Obtain monthly data on the closing prices of BA, ED, the S&P 500 i
Homework 3
Financial Economics
1.
I got the price data off yahoo finance from the Adj Close section
To find it, I searched monthly from January 1, 1995 to December 30, 2015
I did this as yahoo finance seems to treat edge cases in a funny way (such as if I
Homework 4
Financial Economics
1.
I will denote returns by and excess return by , all returns are monthly
The risk premium on SP500 is [500 ] = [500 ] = [500 ]
The premium can thus be estimated as the mean of historical values of 500 (over the
range in ho
Homework 2
Financial Economics
1.
First I will calculate the possible pool/tranche outcomes and their probabilities
X
Y
Z
Probability
Pool
S
M
J
Pays
Pays
Pays
0.7*0.8*0.9=0.504 3000
1000
1000 1000
Default Pays
Pays
0.3*0.8*0.9=0.216 2400
1000
1000 400
Pa
Financial Economics
Problem Set 5
1. Yields of 1, 2, 3, and 5 years bonds for November 20, 2015. Assuming that these
yields correspond to zero coupon bonds and that investor forecasts of future rates
are held with complete confidence, compute the followin