Math 336/Econ 390 Homework
Section 5.3.1 European Options
1. Exercise 5.11 on page 123.
Solution: See page 309
2. What is a lower bound for the price of a four-month call option on a non-dividendpaying stock when the stock price is $28, the strike price i
Math 336/Econ 390 Homework
Section 5.3.2 American Options
1. Exercise 5.13 on page 125
Solution: See page 310.
2. Give an intuitive explanation of why the early exercise of an American put becomes
more attractive as the risk-free rate increases and volati
Math 336/Econ 390-An Introduction to Financial Engineering
Instructor: Zhixin Wu (Office JSMC 310)
Textbook: Mathematics for Finance: An Introduction to Financial Engineering, by
Marek Capinski & Tomasz Zastawniak, 2nd edition
Calculator: Required (any mo
Review sheet for Exam 2
Chapter 5
Exam Date: April 17th, 2014 10:00-11:30 at Julian 251
Chapter 5
Section 5.1
1. Understand the denitions of call and put options, which consist of strike prices and maturity dates. Be able to tell the dierence between Euro
Operation of margins for a long position in two gold futures contracts. The initial margin is $6,000 per contract, or $12,000 in total; the maintenance margin is $4,500 per contract, or $9,000 intotal.
The contract is entered into on Day 1 at $1,250 and c
Math 336/Econ 390 Homework
Section 5.1- Option Definitions
1. An investor buys a European put on a share for $3. The stock price is $42 and the strike
price is $40. Under what circumstances does the investor make a profit? Under what
circumstances will th
Review sheet for Exam 1
Chapter 1-4
Exam Date: March 13th, 2014, 10:00-11:30 at Julian 251
Chapter 1
1. Understand the basic notations and assumptions of the simple market model. Be able to
calculate the returns on the bond and on the stock.
2. Be able to