Reference no: EM131431867
Q1. Suppose the call price is $14.20 and the put price is $9.30 for stock options where the exercise price is $100, the risk-free rate is 5% (continuously compounded), and the time to expiration is one year. Explain how you would create a synthetic stock position (i.e., a portfolio that behaves exactly like a stock but doesn't contain the stock), and identify the cost of the portfolio. Suppose you observe a $100 stock price, identify any arbitrage opportunities. Show the steps you would take to profit from such opportunities.
Q2. Consider the following strategy on May 14 involving June 18 options:
Buy the 125 call at $13.50,
Buy the 130 put at $14.50,
Sell the 130 call at $11.35, and
Sell the 125 put at $ 11.50.
If the risk-free rate is 4.56% per year and the time remaining to expiration is 0.0959 years, should the investor execute the position? What is the net present value of the trade?
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What are the consequences faced by firms
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Determine the percentile endpoints
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Assignments assignment instructions
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Calculate the bootstrap standard error
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What is the net present value of the trade
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Produce output at the lowest average cost
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What you would put into thing like investment and retirement
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Calculate the one sample t confidence interval for sample
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