N494 - Study guides, Class notes & Summaries

Module 5: Assignment N494 Integrating Evidence-Based Practice Write a 1000-1500 word essay addressing each of the following points/questions. Be sure to completely answer all the questions for each bullet point. There should be two main sections, one for each bullet below. Separate each section in your paper with a clear heading that allows your professor to know which bullet you are addressing in that section of your paper. Support your ideas with (2) sources (1 outside source and the textb...

FIN 494 Exam Prepared 5 - 2020 Question 1 1. Which of the following statements is true? If interest rate is positive and the stock pays no dividends then it is better to keep an American call option alive than to exercise it even if it is far in the money It never makes sense to exercise an American put option early If a European option is priced below its lower bound, then the arbitrage includes borrowing at the risk-free rate Put-call parity holds for American options, just like it does ...

FIN 494 Exam Prepared 7_Graded A Question 1 1. Which Greek shows the sensitivity of option price to the volatility of the underlying stock? a. Delta b. Gamma c. Vega d. Theta 10 points Question 2 1. If the implied volatility of an option is lower than your expectation of future stock volatility, you would be more likely to conclude that the option is a. Underpriced because the observed price of the option is lower than you think it should be b. Correctly priced because implied volatil...

FIN 494 Exam Prepared 6 - 2020 Question 1 1. Dynamically hedging a short position in a call option: a. Is more likely to save you money when the option expires out-of-the-money b. Is guaranteed to save you money c. Results in a reduced volatility of the gain / loss 10 points Question 2 1. Consider the following data on a European call option, recorded at two different points in time on the same day (10:00 am and 10:15 am). Suppose you hold a short position in the option and delta-hedge i...

FIN 494 Final Exam Prepared_2020 3,4,6 10check 15 Exchange rate is currently $0.7 US per 1 Canadian Dollar. Interest rate is 2% in the US and 1% in Canada. A bank is short a futures contract on 1,000,000 Canadian Dollars with F= $0.75 per unit, maturing in one year. What position should the bank take to hedge the currency risk? Delta is position size discounted by the foreign interest rate. It should be negative because the bank is short. Delta = - 1,000,000 / 1.01 = -990,099 To hedge, the ...

FIN 494 Exam Prepared 3_2020 Question 1 1. The S&P 500 futures has a multiplier 250. What is the delta of a long position in ten futures contracts? +1 +250 +2,500 +25,000 10 points Question 2 1. S&P 500 is now at 2,000. Ignore interest rate (assume everything is given in PV terms). Suppose you short a $20M portfolio with a beta of 0.8. Find the delta of your portfolio. 8,000 10,000 -8,000 10 points -10,000 -0.8*(20,000,000/2,000)= -8000

FIN 494 Homework 7 Solutions_2020 Problem 1 Which of the Greeks has a positive sign for a call option, but negative sign for a put option? a. Vega a. Delta b. Gamma c. Theta Problem 2 Option is a dollar change in the value of the option per $1 change in the value of the underlying. a. Delta b. Elasticity c. Theta d. Vega Problem 3 When dynamically hedging an option position to make it delta-neutral, the trader needs to trade a. The underlying secu...

FIN 494 Exam Prepared 1_2020 1. Quoted price of the bond is $105. Coupon is 10% per year, paid twice a year. Par value is $100. The most recent coupon was paid 50 days ago, and the next coupon will be paid 132 days from now. Find the cash price of the bond. Round to the nearest integer. • Cash Price of Bond = Quoted Price + Accrued Interest Coupon amount is 10%*100*(1/2)= 5 Paied twice per year Quoted price of the bond is given 105 The cash price of the bond= 105+(50/132*$5)=106.89 ...

FIN 494 Homework 3 Solutions_2020 Problem 1 You are long on oil futures since May 1. On May 2, futures price on 1,000 barrels of crude oil with January 15 delivery was $50 a barrel, while spot price of crude oil was $51 a barrel. One week later, on May 9, futures price on the same contract was $52 and spot price of crude was $53. Between May 2 and May 9, a. Your account balance went up by $2,000 b. Your account balance went down by $2,000 c. Your account balance went up by $1,000 d....

FIN 494 Homework 2 Solutions_2020 Problem 1 Quoted price of the bond is $105. Coupon is 10% per year, paid twice a year. Par value is $100. The most recent coupon was paid 50 days ago, and the next coupon will be paid 132 days from now. Find the cash price of the bond. Round to the nearest integer. a. 100 b. 106 c. 111 d. 115 Accrued Interest = 5 * 50 / 182 = 1.37 Cash price = 105 + 1.37 = 106.37 Problem 2 Cash price of the bond is 116.978. The next coupon of ...