Questions from Business Statistics

Q: Suppose that the spread between the yield on a 3-year

Suppose that the spread between the yield on a 3-year zero-coupon riskless bond and a 3-year zero-coupon bond issued by a corporation is 1%. By how much does Black– Scholes–Merton overstate the value...

Q: Explain the term ‘‘single-tranche trading.’’

Explain the term ‘‘single-tranche trading.’’

Q: What is the value of the swap in Problem 25.8

What is the value of the swap in Problem 25.8 per dollar of notional principal to the protection buyer if the credit default swap spread is 150 basis points? 25.8. Suppose that the risk-free zero curv...

Q: Is a European down-and-out option on an asset

Is a European down-and-out option on an asset worth the same as a European down and out option on the asset’s futures price for a futures contract maturing at the same time as the option?

Q: Does a floating lookback call become more valuable or less valuable as

Does a floating lookback call become more valuable or less valuable as we increase the frequency with which we observe the asset price in calculating the minimum?

Q: What is the value of a derivative that pays off $100

What is the value of a derivative that pays off $100 in 6 months if an index is greater than 1,000 and zero otherwise? Assume that the current level of the index is 960, the risk-free rate is 8% per a...

Q: Describe the payoff from a portfolio consisting of a floating lookback call

Describe the payoff from a portfolio consisting of a floating lookback call and a floating lookback put with the same maturity.

Q: A new European-style floating lookback call option on a stock

A new European-style floating lookback call option on a stock index has a maturity of 9 months. The current level of the index is 400, the risk-free rate is 6% per annum, the dividend yield on the ind...

Q: Estimate the value of a new 6-month European-style

Estimate the value of a new 6-month European-style average price call option on a non-dividend- paying stock. The initial stock price is $30, the strike price is $30, the risk-free interest rate is 5%...

Q: Use DerivaGem to calculate the value of: (a)

Use DerivaGem to calculate the value of: (a) A regular European call option on a non-dividend-paying stock where the stock price is $50, the strike price is $50, the risk-free rate is 5% per annum, th...