You have hedged the option exposure by buying 18000 shares

Assignment Help Finance Basics
Reference no: EM13568729

You are the risk manager of your bank responsible for the derivatives desk. A trader has sold 300 call option contracts each on 100 shares of Nissan Motors with time to maturity of 90 days at USD 1.80. The delta of the option on one share is 0.60. You have hedged the option exposure by buying 18,000 shares of the underlying. The next day, the stock price falls and the delta of the options falls to 0.54. In order to keep the options hedged, you have to

A. Buy 1,800 shares of Nissan Motors

B. Sell 1,800 shares of Nissan Motors

C. Buy 1,080 shares of Nissan Motors

D. Sell 1,080 shares of Nissan Motors

Reference no: EM13568729

Questions Cloud

Draw 3 indiffernce curves in the expected return-standard : draw 3 indiffernce curves in the expected return-standard deviation plane. one for a risk averse individual one for a
Compute the new machines net present value use the : doughboy bakery would like to buy a new machine for putting icing and other toppings on pastries. these are now put on
What are your views concerning platos problems with : 1 what are your views concerning platos problems with democracy? does a democracy breed an oligarchy- the rule of a
What are erosion costs provide one real-life example of an : what are erosion costs? provide one real-life example of an erosion cost for a project. should erosion costs be
You have hedged the option exposure by buying 18000 shares : you are the risk manager of your bank responsible for the derivatives desk. a trader has sold 300 call option contracts
What are the risk premium and expected rate of return on a : what are the risk premium and expected rate of return on a stock with beta 1.5? assume a treasury bill rate of 6 and a
Provide three examples of situations in which business : provide three examples of situations in which business ethics play a role in the financial management process. explain
What is the 99 one-day expected shortfall es of the : greg lawrence is a risk analyst at es bank. after estimating the 99 one-day var of the banks portfolio using historical
What is the standard deviation of a portfolios returns if : what is the standard deviation of a portfolios returns if the mearn returns are 15 the variance of retruns is 184 and

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the initial investment

If the assumed tax rate is 40 percent on ordinary income and capital gains, what is the initial investment?

  Find price of bonds issued on january 1 2013 create journal

mcwherter instruments sold 450 million of 10 bonds dated january 1 on january 1 2013. the bonds mature on december 31

  Explain what is the maximum capital budget

Explain what is the maximum capital budget that can be adopted without adversely affecting stockholder wealth

  What are hcpcs codes

Should hospitals and physicians Medicare patient stays and patient visits in order to reduce the possibility of being charged under the False Claims Act?

  Compare and contrast the approach to strategic planning

Compare and contrast the approach to strategic planning that each company has pursued in order to achieve a competitive advantage. Focus specifically on both intended and emergent strategies.

  What is anton return on equity

Anton's Coffee Shop has a return on assets of 12%. Anton's assets = $100 while Anton's owner's equity = $40 and its debt equals $60. What is Anton's return on equity?

  Which job pays the higher salary

You are offered two jobs. One initially pays $100,000 annually, and your salary will grow annually at 11.5%. The other pays pays $97,000 annually, but your salary will grow at 12%. After ten years, which job pays the higher salary? (for any credit..

  What is the maturity risk premium on 6year treasury security

Further, you expect that real interest rates will be 3.00 percent annually for the foreseeable future. What is the maturity risk premium on the 6-year Treasury security?

  Buy coastal inc imposes the payback cutoff of three years

buy coastal inc. imposes a payback cutoff of three years for its international investment projects.yearcash flow

  Develop and submit a 3-4 page double-spaced tutorial of key

valuation portfoliodevelop and submit a 3-4 page double-spaced tutorial of key bond characteristics and terms. your

  What is the price of the bond

What is the price of the bond if it matures in 15, 20, 25, or 30 years?

  Should a financial plan be considered an unbiased forecast

should a financial plan be considered an unbiased forecast of future cash flows earnings and other financial

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd