A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to maturity is 9 months. For the second option the stock price is 20, the strike price is 19, and the volatility is 25% per annum, and the time to maturity is 1 year. Neither stock pays a dividend. The risk-free rate is 6% per annum, and the correlation between stock price returns is 0.4.
1) Using C/C++ or Java or Matlab to calculate the 10-day 99% Monte Carlo Simulation based VaR for the portfolio. Set the number of simulation to 5000.
2) What else data is required to calculate the 10-day 99% Historical based VaR for the portfolio?
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A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is...
Section B) A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to maturity is 9 months. For the second option the stock price is 20, the strike price is 19, and the volatility is 25% per annum, and the time to maturity is 1 year. Neither stock pays a...
Consider the European digital option that pays a constant H if the stock price is above strike price X at maturity and zero otherwise. Assuming stock price S follows the following SDE under physical measure dS Assuming the risk-free rate is constant r. Please write down the price of this option and explain how it is related to the price of the standard Black-Scholes European call option. A bank has written a call option on one stock and a put...
What is the price of a European put option on a non-dividend paying stock when the stock price is $69, the strike price is $70, the risk-free interest rate is 5% per annum, the volatility is 35%per annum, and the time to maturity is six months? Please give me step by step by step instructions.
Problem 12.25. Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is six months a. Calculate u, d, and p for a two step tree b. Value the option using a two step tree. c. Verify that DerivaGem gives the same answer d. Use DerivaGem to value the option with 5,...
1. A put option on the S&P 500 has an exercise price of 500 and a time to maturity of one year. The risk free rate is 5% and the dividend yield on the index is the index is 30% per annum and the current level of the index is 500, A financial institution has a short position in the option. 2%. The volatility of a) Calculate the delta, gamma and vega of the position. Explain how they can be...
What is the price of a European put option on a non-dividend-paying stock when the stock price is $69, the strike price is $70, the risk-free interest rate is 5% per annum, the volatility is 35% per annum, and the time to maturity is six months?
Consider a European put option on a non-dividend-paying stock. The current stock price is $69, the strike price is $70, the risk-free interest rate is 5% per annum, the volatility is 35% per annum and the time to maturity is 6 months. a. Use the Black-Scholes model to calculate the put price. b. Calculate the corresponding call option using the put-call parity relation. Use the Option Calculator Spreadsheet to verify your result.
A 9-month American put option on a non-dividend-paying stock has a strike price of $49. The stock price is $50, the risk-free rate is 5% per annum, and the volatility is 30% per annum. Use a three-step binomial tree to calculate the option price.
The Call option on the stock has a $13 exercise price and one-year maturity. The volatility of the stock is 10%. The probability of an up or down movement is an equal 50%. The risk-free interest rate is 6% per annum The current stock price is $13. Stock movement is 2 times a year. Value the premium of the option based on Binomial Model.
What is the price of a European call option according to the Black-Sholes formula on a non-dividend-paying stock when the stock price is $45, the strike price is $50, the risk-free interest rate is 12% per annum, the volatility is 25% per annum, and the time to maturity is six months? Show your work in details.