Investment firm sells options, Managerial Economics

Let Consider an economy with three states. The following set of stocks is traded:
 
  x1=(2,2,0)    x2=(1,0,3)  x3=(0,2,4).       
 
The t=0 prices of these stocks are given as follows 
 
(p1, p2, p3)=(1, 1, 1).
 
 
(a)  Is there an arbitrage?

(b)  Assume an investment firm sells options. What is the price of a call option on stock 1 with exercise price E=1? What is the price of a put option on stock 2 with exercise price E=2.

Posted Date: 3/25/2013 2:46:45 AM | Location : United States







Related Discussions:- Investment firm sells options, Assignment Help, Ask Question on Investment firm sells options, Get Answer, Expert's Help, Investment firm sells options Discussions

Write discussion on Investment firm sells options
Your posts are moderated
Related Questions
What are the important external forces Management has to identify all significant factors which influence a firm. These factors can largely be divided into two categories. Mana

The Barcelona Football Club is considering the signing of a player of international fame. The problem is that the player has a reputation for having a weak knee. The probability th

Real Rigidities The New Keynesian economists  rely both on nominal and real rigidities to  arrive at their conclusion that nominal changes in money  supply have real, and not

Refer to above figure. Albania refused to engage in international trade for ideological reasons. To maximize its economic welfare it would choose to produce at which point in the d


Q. Explain about Linear Isoquant? : In this case, isoquant would be straight lines as in Figure below. This type presumes perfect substitutability of factors of production. I

write a note on marris growth maximising model?

Ask questiHow does economic theory contribute to managerial decisions? on #Minimum 100 words accepted#

Q. Explain Maximising revenue method? In a number of cases, a firm's demand and cost conditions are such that marginal profits are greater than zero for all levels of productio

Weighted-average costing: Normal and abnormal spoilage Ranka Company manufactures high-quality leather products. The Company's profits hav declined during the past 9 months. R