Delta with same maturity and excise price

Assignment Help Financial Management

Reference no: EM131563503

Consider this Put option. P= $40, X=45, D=0.80, U=1.2 Risk free Rate: 3%. T= 6months

a-) If you hold one put option today, inidicate whether you need to buy or short and how many shares of stock in order to completely hedge the risk in the long put position in next quarter i.e work for one quarter from now? (Hint: Use the binomial/ construct trees)

b-) What is today's delta with same maturity and expecise price (X) and written on the same stock as the put option from part (a) (Hint: Use put-call)

c-) How will calculate in (a) change if put is American. Dont draw trees, Just indicate.

d-) Consider long Starddle position constructed from Euro put from part (a) and european call option on XYZ Stock with same strike price and maturity. What is the annualized continously compunded expected return on the straddle over next quarter, between now and quarter from now? Assume XYZ stock has an expected continously compunded rate of 10% per year

Reference no: EM131563503

Questions Cloud

Expenses deductible as he is cattle rancher : If a cattle rancher/farmer goes on a trip to Australia to check on buying a herd of kangaroos, are the travel expenses deductible as he is a cattle rancher?

How responsive is management to stockholders : Is this a company where there is a separation between management and ownership? If so, how responsive is management to stockholders?

Saving money to buy store in san francisco : John and Mary are saving money to buy a store in San Francisco.

Measure institutional quality by gadp : Set up OLS cross-country growth regression and show the result of "absolute convergence" using per capita real GDP growth rate and the log of initial.

Delta with same maturity and excise price : What is today's delta with same maturity and expecise price (X) and written on the same stock as the put option from part (a)

Expected cash inflows- What is the project IRR : IRR Project L costs $40,468.02, its expected cash inflows are $9,000 per year for 9 years, and its WACC is 10%. What is the project's IRR?

Find y (t) which optimize. : Question: Find y (t) which optimize. ∫20[(y)2+4ty+t]dt Sub to y(0) = l, y(2) = 4

How many are inside directors : Who is on the board of directors? How long have they served? How many are “inside” directors?

Describe the revenue recognition principle : Briefly discuss how the revenue recognition principle relates to the definitions of assets and liabilities. What is the importance of control

User Account

All Pages