Compute the payoff and net payoff of a bear spread strategy built with put options in the three scenarios above. The put options should have strikes 405 and 409 and mature in February. Draw the profile of the bear spread strategy. Use the data in Table 2. Please show your calculations. Discuss your result.
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Scenarios: You work in the
Scenario A: GDP will rise 3%. This will send the S&P ETF to 414.
Scenario B: GDP will stagnate. S&P ETF will stay at 407.
Scenario C: GDP will fall 2%. This will send the S&P ETF to 400.
Question 1:
Compute the payoff and net payoff of a bear spread strategy built with put options in the three scenarios above. The put options should have strikes 405 and 409 and mature in February. Draw the profile of the bear spread strategy. Use the data in Table 2. Please show your calculations. Discuss your result.
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- ?Q.19 Consider a European call option with the following parameters: Assuming a risk-free annual rate of 8%, what is the probability that the option will be exercised in a risk- neutral world? (If required, use the table at the beginning of the document for statistical calculations.) Strike price USD 48 Expiration 6 months Underlying's Price USD 50 Annual volatility 25% A B C 0.70 0.5761 0.6443 D 0.3668Tony Begay at Saguaro Funds. Tony Begay, a currency trader for Chicago-based Saguaro Funds, uses the following futures quotes on the British pound (£) to speculate on the value of the pound a. If Tony buys 5 June pound futures, and the spot rate at maturity is $1.3981/, what is the value of her position? b. If Tony sells 12 March pound futures, and the spot rate at maturity is $1.4559/E, what is the value of her position? c. If Tony buys 3 March pound futures, and the spot rate at maturity is $1.4550, what is the value of her position? d. If Tony sells 12 June pound futures, and the spot rate at maturity is $1.3981/C, what is the value of her position? CID a. If Tony buys 5 June pound futures, and the spot rate at maturity is $1.3981/2, what is the value of her position? The value of Tony's position is $(Round to the nearest cent. Use a minus sign if value is negative)Maturity (days) Strike 66 Part1: SO 620 595.9355586 ● r (annualized) O 0.056329721 11% Option Type Call Use the data you are provided with on blackboard to replicate and interpret the following figures Call price as a function of the current underlying price S0 or put price as a function of the current underlying price SO depending on the data assigned to you. Carefully interpret the figures. Make sure you are not simply describing the figures but that you are answering the question of why we observe the pattern
- What is the appropriate risk-free rate on May 11, 2022 for an option that expires on Oct 20, 2022 if the T-bill with closest maturity is quoted as 3.65/3.44? a. What is the un-annualized discount rate? Round your answer to two decimals. b. What is the T-bill price? Round your answer to two decimals b . What is the approximate risk-free rate? % Round your answer to two decimalsD3 show the solution in details Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €12,500. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/€1.00 (i.e. u = 1.6 and d = 1/u = 0.625). The current interest rates are i€ = 3% and are i£ = 4%. Choose the answer closest to yours. the answer is A) €3,275What is the implied volatility of a European call option with the following parameters? c = $3 s0 = $40 k = 41 r = 10% T = 0.5 years (Enter 11.51% as 0.1151. Required precision +/- 0.0002)
- Assume a call option on euros is written with a strike price of $1.120/€ at a premium of 4.60¢ per euro ($0.0460/€) and with an expiration date three months from now. The option is for €500,000. Calculate your profit or loss should you exercise before maturity at a time when the euro is traded spot at the following: a) $1.10/€ b) $1.15/€ c) $1.40/€Assume that today the euro futures contracts with a September 15th delivery date are priced at $1.3680/€ . Suppose that you sold 15 contracts of the euro futures today. If, by September 15th the spot rate is $1.3260/€ , your total profit/loss on your position is (the euro futures contract size is €125,000). $78,750 loss $78,750 gain €78,750 loss €5,250 loss None of the abovSuppose the following for European options: Stock price $94 3-month call options with strike price $97 3-month put option with strike price $98 1-year risk-free rate is 3%. The put option is trading ot $5 and there is an identical call option that is trading for $4. The arbitrage gain that can be made is equal to: O a. $2.00 b. $0.27 Oc. $3.00 O d. $1.27 O e $227
- What is the implied volatility of corn futures prices from the following information concerning a European put-on corn futures: Briefly discuss. Current futures price 225 Exercise price 300 Put price 15 Time to maturity 6 months Risk Free 5%Q.3Determine the risk-neutral value for a European put option (for a FLB (First Local Bank) share) that expires in eight months. The strike price is R500 and the current price is R650. The interest rate is 11%, and the volatility of the security is 0.026.1 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.