What is the sign of 0 (i.e., the sensitivity of the price with respect to t) for a European call and for a European put in the Black & Scholes model? Explain.
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- Explain the random walk model for exchange rate forecasting. Can it be consistent with technical analysis?Finance Use the put-call parity to derive the relationship between the theta of a European call option and the theta of a European put option. Show that the relationship holds if you substitute the formulas for theta of call and theta of put in the Black-Scholes model.What determines any difference between the prices of otherwise identicalAmerican and European style call options? Do the same factors affectdifferences between American and European put options? Explain youranswer
- Which of the following is a determinant of exchange rates? a. A change in consumer preferences b. A change in productivity c. A change in real interest rates d. all of theseWhich of the following instruments has the highest cost? Seleccione una: a. Fed Funds b. Commercial Paper c. Eurodollars d. Prime ratewhat is the lower/upper bounds for prices of american call/put options with divdend? is it different with european?
- According to the efficient market school, do the best job at predicting future spot exchange rates.Question Which of the following is a determinant of exchange rates? Answer a. A change in consumer preferences b. A change in productivity c. A change in real interest rates d. all of theseThe price at which a market maker is prepared to buy a currency is termed as O a. Spot rate O b. Ask price OC. Bid rate O d. Forward rate
- When you keep all parameters unchanged but increase K, will the cost of a European putoption increase or decrease?1. Compute the intrinsic value and the time value and the lower bound of the following calls reat these of as American options for the purpose of determining the intrinsic values and time values and as European for the purpose of Lower bound Sep with an Exercise price 115 and Aug with an Exercise price 112 2. Compute the intrinsic value and the time value and the lower bound of the following put. Treat these as American options for the purpose of determining the intrinsic values and time value and as European for the purpose of Lower bound Sept with an Exercise price 102 and June with an Exercise price 112 3. Checks the following combinations of puts and calls and determine whether they conform to the put call parity rule for the European options. If you see any violations suggest a strategy. Aug with an Exercise price 112 4. Consider a hypothetical company with no risk. Will people will be willing to invest money in this company if they expect no return? Why and why not?Critically evaluate the argument that fixed exchange rate regime is better than flexible exchange rate regime.
