MiniCase 2 Blades‚ Inc. Chap 5 1. If Blades uses call options to hedge its yen payables‚ should it use the call option with the exercise price of $0.00756 or the call option with the exercise price of $0.00792? Describe the tradeoff. 2. Should Blades allow its yen position to be unhedged? Describe the tradeoff. Chap 6 1. Did the intervention effort by the Thai government constitute direct or indirect intervention? Explain. 2. Did the intervention by the
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European call option with strike price of K and maturity T and buys a put with the same strike price and maturity. Describe the investor’s position. The payoff to the investor is - max (ST - K ‚ 0) + max(K - ST‚ 0) This is K- ST in all circumstances. The investor’s position is the same as a short position in a forward contract with delivery price K. 8 .4.)Explain why brokers require margins when clients write options but not when they buy options? When an investor buys an option‚ cash must
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and student number on each exam book that you use to answer the questions. Good luck! ~ ~1; r 1~~t E )’HC.)c.. ? .113 Suppose call and put prices are given by Strike Call premium Put premium 80 22 4 100 9 21 (IJ Find the convexity violations. (1.-) What spread would you use to effect arbitrage? 105 5 24.80 o t: y- (Q I A New York finn is offering a new financial instrument called a "happy calL" It has a payoff function at time T equal to
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Wall Street 2. Journal. The premium on one IBM February 90 call contract is A. $4.1250 B. $418.00 C. $412.50 D. $158.00 E. None of these is correct 3. A put on Sanders stock with a strike price of $35 is priced at $2 per share‚ while a call with a strike price of $35 is priced at $3.50. The maximum per-share loss to the writer of an uncovered put is __________‚ and the maximum per-share gain to the writer of an uncovered call is _________. A. $33; $3.50 B. $33; $31.50 C. $35; $3.50 D. $35;
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Question 1: Consider an option on dividend-paying stock when stock price $30‚ the exercise price is $29‚ the risk-free interest rate is 5% p.a.‚ the volatility is 25%p.a. and time to maturity is 4 months. Assume that the stock is due to go ex-dividend in 1.5 months. The expected dividend is 50cents. a. b. c. what is the price of the option if it is a European call? What is the price of the option if it is a European put? Use the results in the Appendix to this chapter to determine whether there
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$50. The stock pays a dividend of $5 in 3 months. A 6-month European put option on the stock has a strike price of $48 and a premium of $4.38. The continuously compounded interest rate is 8%. Calculate the premium for a 6-month European call option on the stock with a strike price of $48. * A 1.02 * B 3.36 * C 3.46 * D 4.38 * E 5.40 2 1. An "exchange call option" gives the owner of the option the right to give up one share of Stock A in exchange for receiving one share
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standing at 800. Explain how a put option on the S&P 100 with a strike price of 700 can be used to provide portfolio insurance. 2. “Once we know how to value options on a stock paying a dividend yield‚ we know how to value options on stock indices and currencies.” Explain this statement. 3. Explain how corporations can use range-forward contracts to hedge their foreign exchange risk. 4. Calculate the value of a three-month at-the-money European call option on a stock index when the index
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LUFTHANSA: TO HEDGE OR NOT TO HEDGE 1. If the DM/US$ exchange rate were 2.4DM/US$ in January 1986‚ what would be the all in cost of the aircraft purchase under each alternative? What would be the all in cost of the aircraft purchase under each alternative if the exchange rate were 3.4DM/US$? Consider both fully hedging the cost and hedging exactly one half of the cost (why may you only want to hedge part of the purchase price?). 1. Do nothing and wait and see what the exchange rate is like
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The Yen In only 142 years Japan’s economy changed from an antiquated monetary system to the world’s third most traded currency and forth most used reserve currency after the U.S. dollar‚ the euro‚ and the pound sterling. Truly the Japanese Yen is still an unappreciated economic force waiting for it’s chance to take center stage on the world market. CREATION OF THE YEN The Yen came into existence May 10‚ 1871 after the Meiji government chose to abandon Tokugawa coinage
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Asia-Focused Hedge Funds: Analysis of Performance‚ Performance Persistence and Survival Asia-Focused Hedge Funds: Analysis of Performance‚ Performance Persistence and Survival Pattern DISSERTATION of the University of St.Gallen‚ SchoolS E R T A T I O N D I S of Management‚ of the University of St.Gallen‚ Economics‚ Law‚ Social Sciences School of Management‚ and International Affairs Economics‚ Law‚ Social Sciences to obtain the title of and International Affairs Doctor of Philosophy in Management
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