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Task 1
(a) Use Bloomberg to estimate the prices and the Greeks of the following stock indexoptionsStrikes 5,800 5,500 5,400Call-3monthsPut-6monthsNote that these are FTSE-100 Index Options and the value of the index today isassumed to be 5,700. The options should be priced within the Black & Scholesframework using the following inputs: rate of interest 1.00%p.a., dividend yield 0.00%,and volatility 6.00% p.a.State clearly each necessary step requested to compute the price and the Greeks of theoptions above.
(b) Write a short report with a critical summary of the results.
Task 2
Consider the Single Index Model (SIM).
(a) State and comment on all the main assumptions underlying the SIM.(b) Use Bloomberg to collect data on 4 stocks. Assume that you invest an equal amount ofyour wealth on each stock and build up a portfolio.
Estimate:
(i) The beta of your portfolio; comment your empirical results.
(ii) The market risk and non-market risk; comment on your results.
(iii) The covariace matrix; comment on your resultsState all your assumptions and computations.
Management Plan found on your student website for each of the three employees. Be sure to include the point values and meanings for all assessments.
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The stock with the lowest beta (0.76) is Apple Inc. stock. The stock with the highest beta (3.29) is Facebook Inc. stock. Beta for Apple Inc. stock is less that 1, it tells us that stock price is less volatile and risky than mark..
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