How can one use the put-call parity result to solve problem

Assignment Help Microeconomics
Reference no: EM13183757

You are pension fund manager with a problem. You are constrained by regulation to hold 50% of your pension portfolio in shares, but you are very worried about a stock market crash and would like to hold only riskless bonds. You are not constrained in dealing with a bank that will trade puts and calls with you. Can you use the put-call parity result to solve your problem by effectively holding and writing puts and calls?

Reference no: EM13183757

Questions Cloud

Secondary education versus a post-secondary education : Devise a government subsidy that will induce private education providers to educate socially optimal number of students. Explain. Provide a $ amount for the subsidy.Does it ever make sense to not educate some students. If the example were couched ..
Should the ceo at plain truth cancel the audit : Plain Truth Adverting employs KPR, a large accounting firm, to audit its books each year. This involves considerable expense for the advertising firm, since its sales account managers are very independent and maintain separate record keeping syste..
Should the ceo at plain truth cancel the audit : Plain Truth Adverting employs KPR, a large accounting firm, to audit its books each year. This involves considerable expense for the advertising firm, since its sales account managers are very independent and maintain separate record keeping syste..
How to change any aspects of decision making : Sidney Featherstone of TIP, Inc. is owner and CEO of the company. He has made the company successful through his decision making over the years. This year he decided to retire to Costa Rica. He does not intend to change any aspects of decision mak..
How can one use the put-call parity result to solve problem : You are pension fund manager with a problem. You are constrained by regulation to hold 50% of your pension portfolio in shares, but you are very worried about a stock market crash and would like to hold only riskless bonds. You are not constrained..
Explain the carburizing gas holds the surface composition : The carburizing gas holds the surface composition at 1% carbon for all t > 0. If D=1.4 x 10^-7 cm^2/sec: (a) Calculate the time required at the carburizing temperature
What happens to the reserves of the bank : What happens to the reserves of the bank? What happens to the money supply in the economy as a whole if the reserve requirement is 10%, all payments are made by check, and there is no net drain into currency? How would your answer in part b be aff..
State how many molecules does one mole of sugar : the mass of ahydrogen atom is 1, and the mass of an oxygen atom is 16 daltons,how many molecules does one mole of sugar(C12H22O11) contain?
How many years did it take you to earn your college degree : The mean time an American family lives in a particular single-family dwelling is 11.8 years. A sample of 100 families in the Sycamore, OK area shows the mean time living in a single family residence is 12.7 years. Can we conclude that the time peo..

Reviews

Write a Review

 

Microeconomics Questions & Answers

  What happens if the economy booms

Suppose you are appointed to chair the Federal Reserve. Your twin goals are to maintain low inflation and to stabilize economic activity- that is, to keep output at potential. Why are these appropriate goals for monetary policy?

  Derive the marginal product functions

Describe the market growth rate for product and service.

  Use a diagram to show demand curve and marginal revenue

Northern Granite Corporation, a corporation in New England, installs granite counter tops in houses. When it 1st entered the business, price per foot for installing a granite counter top was $180 per square foot,

  Calculate the profit for that level of output

Calculate the profit for that level of output, as well as the level of output immediately above and below it and what level of output will this firm operate at in order to maximize its revenues or minimize its losses?

  Economic interplay-airline industry

Discuss how the interplay between economies of density and the properties of hub-and-spoke networks give rise to economies of scope.

  Computing operating cash flow for project

Operating Cash Flows. Laurel's Lawn Care, Ltd., has a new mower line that can generate revenues of $120,000 per year. Direct production costs are $40,000 and the fixed costs of maintaining the lawn mower factory are $15,000 a year.

  How this will affect market for rental property in lawrence

Briefly explain whether you agree with the following statement: "If at the current quantity marginal benefit is greater than marginal cost, there will be a deadweight loss in the market.

  Define aggregate production function

Assuming other things equal and capital and labor are fixed in quantity and using our aggregate production function and factor market diagrams, illustrate what happens to output, the real retal rate on capital, and the real wage of labor following..

  Economic technological revolution

Select 5-innovations associated with Industrial Revolution and five innovations from Technological Revolution. For each innovation, recognize the effects it had on individuals, societies, businesses, and politics.

  Explain economic growth

Within rich economies, there is strong evidence of convergence ________.for regions within a country.with developing economies. leading to military conflict.

  Estimated demand function for one-month memberships

Interpret the estimated demand function for one-month memberships and calculate the point price elasticity of demand and point income elasticity of demand in Town D at the price charged last year.

  Competitive stance in marketplace

Explain how a company that is competing in a purely (or perfectly) competitive market should increase its competitive stance in the marketplace. Provide specific examples.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd