Estimate the delta and the gamma for option

Assignment Help Other Engineering

Reference no: EM133037112

Question 1:

You would like to purchase a call option for the high tech stock MCCA.

Assume today is April 29, 2021, before the market has opened.

MCCA
Option Type	Stock Price	IV	Strike Price	Exp	Vol	Open Int
Call	21.18	36.32%	20.00	May, 2021	3,051	40,421
	Annual interest rate =	3.00%			Trading days per year =	252

a) How many days (for price calculations) until the option expires?

b) Based on the information shown in the table to the right, create the complete daily binomial lattice for the stock price. Show your latttice.

c) Using a daily binomial lattice, calculate the option value. Show your option value lattice.

d) Estimate the delta and the gamma for option using the binomial lattice results.

Question 2:

You would like to purchase a put option for the high tech stock MCCA.

Assume today is April 29, 2021, before the market has opened.

MCCA
Option Type	Stock Price	IV	Strike Price	Exp	Vol	Open Int
Put	21.18	36.32%	20.00	May, 2021	3,051	40,421
	Annual interest rate =	3.00%			Trading days per year =	252

a) Based on the information shown in the table to the right, use the daily binomial lattice method to estimate the American put option value.
Show your lattice.

b) Based on the information shown in the table to the right, use the daily binomial lattice method to estimate the European put option value. Show your lattice.

Question 3:

Based on the information shown in the table to the right, answer the following questions, a through e.

Assume today is April 29, 2021, before the market has opened.

ABCD
Option Type	Stock Price	IV	Strike Price	Exp	Vol	Open Int
	25.28	41.52%	24.00	May, 2021	4,892	55,057
	Annual interest rate	3.30%			Trading days per year	252

a) Calculate the call option value using the Balck-Scholes equations.

b) Calculate the put option value using the Black-Scholes equations.

c) Using the Black -Scholes equations, calculate the Greeks for the call option.

d) Using the Black -Scholes equations, calculate the Greeks for the put option.

Question 4:

Assume today is November 29, 2021. One year ago, on December 11, 2020, you created a minimum variance portfolio based from the five stocks shown to the right.

The minimum variance weights for the five stock portfolio are:

		Weight
The minimum variance weights for the five stock portfolio are:	Stock A	-0.032287675
	Stock B	-0.018391368
	Stock C	1.013997957
	Stock D	0.010587176
	Stock E	0.026093909

The total value of the portfolio when you satrted on December 11, 2020, was $1,000,000.00

a) Determine the portfolio value for each of the trading days this past year; fill in the yellow cells in the table provided to the right.

b) Using all 252 trading days worth of stock data that you have accumulated since the beginning of your investment, calculate the 95% VaR and the 99% VaR using the Historical Method.

Question 5:

We will use the same data as in Question 4, which is shown to the right.

The minimum variance weights for the five stock portfolio are:

The minimum variance weights for the five stock portfolio are:		Weight
	Stock A	-0.032287675
	Stock B	-0.018391368
	Stock C	1.013997957
	Stock D	0.010587176
	Stock E	0.026093909

The total value of the portfolio when you satrted on December 11, 2020, was $1,000,000.00

a) Based on the covariance matrix provided, and using the values you invested in each of the stocks in your portfolio from Question 7, determine the Variance Standard Deviation and Average Return for your portfolio for today,
November 29, 2021, the last day.

b) Using the Variance-Covariance Method, calculate the 95% VaR and 99% VaR.

Attachment:- stock MCCA.rar

Reference no: EM133037112

Questions Cloud

What is the macro and business environment : What is the macro and business environment to which coca cola is exposed to?

Four political risks which can impact international business : Problem: Explain any four (4) political risks which can impact international business? Give examples to support your response.

By what amounts preferred stock accounts increased : If 3,000 shares of 8 percent, $50 par value preferred stock were issued for cash at $60 per share, By what amounts Preferred Stock accounts increased

Critical success factors for international projects : 1. Which of the following are considered critical success factors for international projects? (check all that apply) Select one or more:

Estimate the delta and the gamma for option : Estimate the delta and the gamma for option using the binomial lattice results and calculate the option value. Show your option value lattice

What portion of a total in dividends to be declared : A company has 10,000 shares of 6 percent, what portion of a total of $96,000 in dividends to be declared by board of directors would go to each class of stock

Improve ethical decision making : Outline why managers behave unethically and the possible strategies that international businesses can implement to improve ethical decision making.

What is crm : What is CRM? How is it applied? What are the positives or negatives, risks and opportunities?

How do you see the us-china relationship evolving : How do you see the US-China relationship evolving?

User Account

All Pages