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- On Jan 18 2022, SPY (the ETF) closed at 456.02. The short-term interest rate is 0.25%. Assume no dividend payments before the February 18 expiration. The minimum value of the February 2022, K = 454, Call option, on Jan 18 2022 was 2.02 larger than 2.02 smaller than 2.02, but not zero zeroAn asset manager is contemplating to enter into a two-year equity swap in which he gets the S&P 500 Index's rate of return in exchange for paying a fixed interest rate. At the start of the trade, the S& P 500 stock index was at 1161.73. Semiannual payments are required under the swap. A. Determine the swap's annualized fixed rate, given the current interest rate term structure as follows: Lo(180) = 0.0501 Lo(360) = 0.0533 L.(540) = 0.0640 | L.(720) = 0.0669 the swap's market value 160 days late Det is in place. the new rm structure L160(20) = 0.0549 L160(200) = 0.0633 L160(380) = 0.0689 L160(560) = 0.0712 The S&P 500 is currently trading at 1214.94. The swap's nominal principal is $110 million. B.It's June, the stock price for CXY is$105.11. CXY does not pay dividends. The November put option on CXY with a strike price of$109is trading at$2.5. The current interest rate for all maturities is2%, compounded quarterly. Is there an arbitrage opportunity and why? If yes, identify an arbitrage strategy without any out-of-pocket expenses that yields positive profits when the option expires. Explain all steps and cash flows involved and show all calculations.
- You write a put option contract at a premium of $1.55/option; you are short in the put. The options expire in 6 months at a strike price of $28/security. What is your net gain or loss if at expiration, the underlying security is trading at $33.25/security?Google puts with 1 year to expiration and an exercise price of $680 trade for $27. Google calls with 1 year to expiration and an exercise price of $680 trade for $45. The interest rate over 1 year is 1%. Assume all options are European and Google pays no dividends. Using the put-parity condition, the stock price is equal to $691.27. a) In one month, the stock price remains the same as given above. Is the call option value lower, higher, or the same. Explain briefly.A put option and call option with an exercise price of $50 expire in four months and sell for $5.99 and $8.64, respectively. If the stock is currently priced at $52.27, what is the annual continuously compounded rate of interest? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Rate of interest %
- An investor enters a three-year swap contracts bypaying fixed price and receive spot price of Applesstock at the end of each year. The spot price ofApple's stock is Ș515 now, and the risk-free rate is3%.a. Draw the synthetic forwards contracts tomimicking this swap contract.o. Compute the rational fixed price based onarbitrage-free principalAn investor enters a threeyear swap contracts by paying fixed price and receive spot price of Apple’s stock at the end of each year. The spot price of Apple’s stock is $515 now, and the risk-free rate is 3%. 1.Draw the synthetic forwards contracts to mimicking this swap contract. 2.Compute the rational fixed price based on arbitrage-free principal.Both a call and a put currently are traded on stock XYZ; both have strike prices of $49 and expirations of six months. Required: a. What will be the profit/loss to an investor who buys the call for $4.25 in the following scenarios for stock prices in six months? (Loss amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) b. What will be the profit/loss in each scenario to an investor who buys the put for $7.10? (Loss amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)
- Suppose that, on 5 November 2020, you opened a short position in a two-year futures contract on the Tesla stock. The share price at the beginning of the contract was $146, and the initial futures price was equal to a theoretical two-year forward price. Assume the following: initial margin of 40% of the futures value, maintenance margin of 32% of the futures value, 3% flat interest rate, continuous compounding, no withdrawals of the excess margin. Next, suppose that, on 1 November 2022, the Tesla stock is priced at $228 per share, and it goes down by 1% daily over 2nd, 3rd and 4th November. Suppose further that, on 1 November 2022, you have received a margin call from your broker (this was your first margin call during this contract) and had to make an instant adjustment to your margin account. Your position in this contract is closed on 4 November 2022. How can you assess your overall profit or loss? Would your overall profit/loss from 1) change if, on 5 November 2020, you had…The current stock price of IBM is $64. A put option on IBM with an exercise price of $67 sells for $7 and expires in 1 month(s). If the risk-free rate is 1.1% per year, what is the price of a call option on IBM with the same exercise price and expiration date (keep two decimal places)?Suppose that, on 5 November 2020, you opened a short position in a two-year futures contract on the Tesla stock. The share price at the beginning of the contract was $146, and the initial futures price was equal to a theoretical two-year forward price. Assume the following: initial margin of 40% of the futures value, maintenance margin of 32% of the futures value, 3% flat interest rate, continuous compounding, no withdrawals of the excess margin. Next, suppose that, on 1 November 2022, the Tesla stock is priced at $228 per share, and it goes down by 1% daily over 2nd, 3rd and 4th November. Suppose further that, on 1 November 2022, you have received a margin call from your broker (this was your first margin call during this contract) and had to make an instant adjustment to your margin account. Show how the balance on your margin account was changing over this period (i.e., 1-4 November 2022).