A European call and put option on the same security both expire in threemonths, both have a strike price of $20 and both sell for a price of $3. If the nominalcontinuously compounded interest rate is 10% and the stock price is currently $25,identify an arbitrage.

A futures contract will mature in one time step. The current return over one time-step is R = 1.01 and the underlying asset of the future contract is currently worth $27 and has up factor u = 1.1 and down factor d = 0.9. The margin account for the short side of this futures contract currently holds $16. How much will the margin account hold when the futures contract matures if the underlying asset increases in value?

1. Put and Call options a) On the 10th of December 2020, an investor buys a call option (European) with a strike price of £30 for £3 with a maturity of three months. When will the trader exercise the option? Describe when they would lose money? b) The same investor sells a put option with a strike price of £40 for £5. What is the investor's maximum loss and maximum gain?

4b) A trader is asked to value a 1-year European call option for Facebook Ltd. common stock, which last traded at 43 USD. He has collected the following information: call and put option exercise price 45 USD, 1-year put option price 4 USD, 1-year Treasury bill rate 5.50% continuously compounded. Calculate the European call option value using put-call parity.

Calculate the European call and put option on the basis of the following data: Consider the following facts regarding Bank Windhoek, which is publicly traded on the Namibian Stock Exchange (NSX): The current stock price is N $18, the exercise price is N $16, the duration of the option is 180 days, the volatility is 35%, and the risk-free rate is 8%. Show all your calculations. 1. What is the value of the European call option? 2. What is the value of the European put option? 3. Comment on the Value for both the European call & put options. 4. Why is a Black Scholes Merton model used to price options

A share is currently priced at £50. After one time period the share price will either increase to £70 or decrease to £40. Assume the interest rate is 4% per time period. Find the no-arbitrage price of a European derivative on the share which has payoff £90 if the share price goes up and £110 if the share price goes down. State your answer to the nearest pence. Do not enter the pound sign.

A firm has a payable of €2,400,000.00. They hedge this exposure with a call option with a strike price of $ 1.2083 / €. The premium of the option is $0.0121. If at the time of payment the spot price ends up equal to $ 1.2687 / €. What is the firm's total cost?

An investor holds the fixed-payer position in a 7.44%/LIBOR swap with $1M notional principal, semi-annual payments, and exactly one-year remaining. What is the value of the existing fixed-payer position, if the swap rate for new one-year swaps with matching notional principal is 3.57%/LIBOR

7. Evaluate the following substitution swap: You currently hold a 25-year, 9.0 percent coupon bond priced to yield 10.5 percent. As a swap candidate, you are considering a 25-year, Aa-rated, 9.0 per- cent coupon bond priced to yield 10.75 percent. (Assume a one-year work-out period and reinvest- ment at 10.5 percent.) Dollar investment Coupon i on one coupon Principal value at year end Total accrued Realized compound yield Value of swap: Current Bond Candidate Bond basis points in one year

Melbourne Capital Ltd considers selling European call options on ANZ Bank Ltd for $1.50 per option. The current market price is $17.70 on 28th September 2020, the exercise price is $20, and the maturity of each call option is 6 months. (i) Under what circumstances does the investor make a profit?    (ii) Under what circumstances will the option be exercised?   (iii) How many call options should the investor sell to raise a total capital of $1,260,000?