1 Consider the euro call option for May with a strike price of $1.1200/€. This option gives the buyer the right to purchase a euro futures contract for €125,000 at a price per euro of $1.1200 until and including the expiry date in May. The price of the option, 1.09 US cents per euro. 2 Consider the euro put option for May at the strike price $1.1200/€. This option has a price per euro of 0.94 US cents, or $0.00940/€. The option to sell €125,000 up to and including the maturity date in May ⇒ Analyze the payoff profiles of buyer and writer of these two euro call/puy options for €125,000.

1 Consider the euro call option for May with a strike price of $1.1200/€. This option gives the buyer the right to purchase a euro futures contract for €125,000 at a price per euro of $1.1200 until and including the expiry date in May. The price of the option, 1.09 US cents per euro. 2 Consider the euro put option for May at the strike price $1.1200/€. This option has a price per euro of 0.94 US cents, or $0.00940/€. The option to sell €125,000 up to and including the maturity date in May ⇒ Analyze the payoff profiles of buyer and writer of these two euro call/puy options for €125,000.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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use binomial option pricing model for this question. suppose the current spot rate for USD/CHF is 0.7. you need to find the one-year call option price of USD/CHF with the exercise price of 0.68 USD/CHF. Assume that our future states will be either 0.7739 U&SD/CHF or 0.6332 USD/CHF. 1) What are the payoffs of a call option (for both states) 2) what is the hedge ratio of the call option?
Assume spot rate for Euro is $1.1900 and the three-month forward rate is $1.1710. What is the minimum price that a six-month American put option with a striking price of $1.220 should sell for in a rational market? Assume the annualized six-month Euro rate is 0.5 percent. O $0.0489 O $0 O $0.0300 $0.0389
Please answer it with no descriptions or details, with the question numbers and answers, the exact way it should go on according to the red regulations, thank you!
(a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (i) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above. (b) Discuss factors that you would consider in evaluating the political risk associated before making FDI in a foreign country.
Choose all expressions that accurately complete the statement below: Writing a European call option on £10,000 at a strike price of $1.80/£ and a premium of $0.02/£: Group of answer choices Obligates the optionholder to purchase £10,000 for $18,000 USD. Will be profitable for the seller when the price of the GBP exceeds the put-call parity rate. Obligates the writer to sell £10,000 on the expiration date if the optionholder chooses to exercise. Allows the optionholder to exercise the option at any point up to the expiration date. Earns the seller a premium of $200.
A trader purchased an at the money 1 year OTC put option on the DAX index for a cost of Eur 10000. What is the traders minimum potential credit Exposure to the counter part over the term of the trade
You use a forward binominal tree to price options on a futures contract. You are given: i) The period is 1 year ii) The volatility of the futures price is 30% iii) The initial futures price is 100 iv) The continuously compounded risk-free rate is 3% Calculate the price of a one-year 110-strike European call option on the futures contract. A. 8.68 B 9.13 C 10.32 D 11.54 E 12.06
4. An American put option to sell a British pound for dollars has a strike price of $1.5 and a time to maturity of 1 year. The volatility of the pound/dollor exchange rate is 15% per annum, the dollar interest rate is 6%, the British pound interest rate is 7%, per annum, and the current exchange rate is 1.52. Use a three-step binomial tree to value the option.
13. The USDJPY spot price is 115.018 and the one month forward is 115.046. A one month expiration European style call option with a strike price of 115.046 is trading at 4¥ and a put option with the same parameters is trading at 5¥. If we purchase the call and sell the put sketch the payoff of this position at expiry (the expiration date) over the range 114.900 to 115.140. If we were going to hedge an exposure to the Yen should we use the option position or the forward? Justify your answer.
June 2021 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be $0.05831 per MXN. MXN500,000 is the contract size of one MXN contract. Required: What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits, assuming you take a position in three contracts. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes?
A trader in the United States has a portfolio of derivatives on the Australian dollar with a delta of 456. The USD and AUD risk free interest rates are 5% and 8%. What position in a one-year forward contract on the Australian dollar creates a delta-neutral position? Question 9 options: Long 494.0 Short 494.0 Short 394.0 None of the above
A trader in the United States has a portfolio of derivatives on the Australian dollar with a delta of 456. The USD and AUD risk free interest rates are 5% and 8%. What position in a one-year forward contract on the Australian dollar creates a delta-neutral position? Question options: Long 494.0 Short 494.0 Short 394.0 None of the above

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