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Options with discontinuous payoffs are called Binary options. An example is the cash-or-nothing callwhich pays nothing if the stock price at the maturity of the option is below the strike price and pays a fixed amount Q if the stock price is above the strike price. Another type of binary option is an asset-or-nothing call. This call pays nothing if the stock price is below the strike price at the maturity of the option and pays the stock price (ST) if the stock price is above the strike price. A regular European call is equivalent to a long position in an asset-or-nothing call and a short position in cash-or-nothing call.
The stock price is $50, the volatility of the stock is 30%, and the interest rate is 6%. Consider a cash-or-nothing call with a strike price of $52 and maturity of 6 months and the fixed amount it pays, when the stock price is above the strike price, is the strike price itself. Also consider a asset-or-nothing call with the same strike price and maturity as the earlier call. Use simulation to arrive the price of these two calls. Also, verify the relationship between cash-or-nothing call, asset-or-nothing call, and a regular call option. Do 1000 simulations.
ORDER OF PAYMENTS The bankrupt’s estate must be distributed in the following order. 1. Cost and charges: Costs and charges properly incurred in administering the estate mu
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A lawn care company started business on January 1, 2012. The company billed clients $105,000 for lawn care services completed in 2012. By December 31, the company had received $84,
Q. Explain the Matching Principle? Matching Principle - A basic concept of basic accounting. In any one given accounting period, you must try to match the revenue you are repor
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INTRA COMPANY ADJUSTMENTS In preparing the consolidated balance sheet, the following items may require adjustments:. 1 Goodwill 2 Unrealized profit on closing inventory 3
Inventory control implies a planned approach of ascertaining while to buy, how much to buy and how much to stock hence costs including storing and buying are optimally minimum, wit
Journal Entries for Dissolutions The following journal entries are relevant for the purpose of recording all dissolutions: 1) DR. Revaluation account CR. Asset account
Court jurisdiction A court may limit a grant of representation which it has jurisdiction to make, as follows: 1. Where the will has been lost or mislaid since the testator's
Suppose the interest rate for a one-period bond is 4% between the current period and the next. Then the rate becomes 5% for ever. (a) What is the price of an asset paying (1,1,1
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