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suppose T= 30 to begin 7. Suppose you are high frequency trading of stocks, if the current price of the stock is 5...
0.2. The time-t price of a stock is s(t). You are given: (1) A stock's price...
0.2. The time-t price of a stock is s(t). You are given: (1) A stock's price follows geometric Brownian motion with a = 0.01 and (ii) S(O)= 40. Calculate Pr(40<S(5) < 50).
Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a...
Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a share. You want to ensure that you do not lose more than $200 a share. Which of the following option strategies would allow you to do this? A. A covered call B. A naked call C. A protective put D. You cannot ensure that you will not have losses with stocks
Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a...
Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a share. You want to ensure that you do not lose more than $200 a share. Which of the following option strategies would allow you to do this? A. A covered call B. A naked call C. A protective put D. You cannot ensure that you will not have losses with stocks Suppose I buy 100 shares of AMD and want to limit my losses...
Suppose you believe that the price of Stock X is going to increase from its current...
Suppose you believe that the price of Stock X is going to increase from its current level of $18 during the next several months. For $4 you buy a call option giving you the right to buy 1 share at a price of $24 per share. d. Calculate the net profit percentage (rate of return) on the option. e. Calculate the breakeven price of the stock--the stock price that would produce neither a net profit nor a net loss for...
Question 5 (10 points) Suppose you believe that Du Pont's stock price is going to decline...
Question 5 (10 points) Suppose you believe that Du Pont's stock price is going to decline from its current level of $ 82.09 sometime during the next 5 months. For $ 717.05 you could buy a 5-month put option giving you the right to sell 100 shares at a price of $ 84 per share. If you bought a 100-share contract for $ 717.05 and Du Pont's stock price actually changed to $ 70.62 , your net profit (or loss)...
* Suppose, you would like to buy 100 sprint stock shares. The current price of each...
* Suppose, you would like to buy 100 sprint stock shares. The current price of each sprint stock is $6.38. You believe that you will be able to sell your sprint stock shares in 3 years for $1200. Find out the value of r. (5 points)
Suppose you believe that BAMBOOM Inc.'s stock price is going to increase from its current level...
Suppose you believe that BAMBOOM Inc.'s stock price is going to increase from its current level of $22.50 sometime during the next 3 months. For $3.14 you can buy a 3-month call option giving you the right to buy 1 share at a price of $26 per share. If you buy this option for $3.14 and BAMBOOM's stock price actually rises to $45, what would your pre-tax net profit be?
1. (5 marks) No-arbitrage option pricing. Suppose the current stock price is $20. A two state...
1. (5 marks) No-arbitrage option pricing. Suppose the current stock price is $20. A two state tree is defined such that after 3 months, the stock price may increase to $22 with probability 0.1 and decrease to $18 with probability 0.9. Consider a European call option with strike, K=$21 and expiry T=3 months. The no-arbitrage value of the call option for today is given as $0.633 and interest rate = 12%. Suppose the option value V* > 0.633. Devise a...
Please show all work and equations as needed. You have been given the price at t...
Please show all work and equations as needed.
You have been given the price at t -0 (Po) and probability distribution for the price at t-1 (Pi) for three stocks Pi Boom (30%) 70 50 Normal (50%) 60 35 50 Recession (20% 50 20 40 Po Stock A Stock B Stock C 30 45 a. What is the expected holding-period return for each stock? b. What is the expected standard deviation for each stock? C. Suppose the risk-free rate of...
5. You own a call option on the stock with current price So = 4, the...
5. You own a call option on the stock with current price So = 4, the "up factor" u = 2. the ..down factor, d-1/2, the risk-free interest rate r-1/4 and the strike price K-5. You paid the risk-neutral price of $1.20 for this option, and you want to hedge your position (i.e. reduce your risk) so that you end up with $1.50, (as if you had invested $1.2 at the risk free rate) regardless of whether H or T...
0.2. The time-t price of a stock is s(t). You are given: (1) A stock's price follows geometric Brownian motion with a = 0.01 and (ii) S(O)= 40. Calculate Pr(40<S(5) < 50).
Question 5 (10 points) Suppose you believe that Du Pont's stock price is going to decline from its current level of $ 82.09 sometime during the next 5 months. For $ 717.05 you could buy a 5-month put option giving you the right to sell 100 shares at a price of $ 84 per share. If you bought a 100-share contract for $ 717.05 and Du Pont's stock price actually changed to $ 70.62 , your net profit (or loss)...
* Suppose, you would like to buy 100 sprint stock shares. The current price of each sprint stock is $6.38. You believe that you will be able to sell your sprint stock shares in 3 years for $1200. Find out the value of r. (5 points)
1. (5 marks) No-arbitrage option pricing. Suppose the current stock price is $20. A two state tree is defined such that after 3 months, the stock price may increase to $22 with probability 0.1 and decrease to $18 with probability 0.9. Consider a European call option with strike, K=$21 and expiry T=3 months. The no-arbitrage value of the call option for today is given as $0.633 and interest rate = 12%. Suppose the option value V* > 0.633. Devise a...
Please show all work and equations as needed.
You have been given the price at t -0 (Po) and probability distribution for the price at t-1 (Pi) for three stocks Pi Boom (30%) 70 50 Normal (50%) 60 35 50 Recession (20% 50 20 40 Po Stock A Stock B Stock C 30 45 a. What is the expected holding-period return for each stock? b. What is the expected standard deviation for each stock? C. Suppose the risk-free rate of...
5. You own a call option on the stock with current price So = 4, the "up factor" u = 2. the ..down factor, d-1/2, the risk-free interest rate r-1/4 and the strike price K-5. You paid the risk-neutral price of $1.20 for this option, and you want to hedge your position (i.e. reduce your risk) so that you end up with $1.50, (as if you had invested $1.2 at the risk free rate) regardless of whether H or T...
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