Questions from Business Statistics

Q: One way to create a bear spread positions is by purchasing a

One way to create a bear spread positions is by purchasing a high strike put option and selling a low strike put option. Identify a strategy with call options that creates a similar bear spread-shaped...

Q: Compare and contrast the characteristics of contango, backwardation, normal contango

Compare and contrast the characteristics of contango, backwardation, normal contango, and normal backwardation markets.

Q: The value Max[0, X(1 r)−T

The value Max[0, X(1 r)−T − S0] was shown to be the lowest possible value of a European put. Why is this value irrelevant for an American put?

Q: Show how to combine a currency swap paying Swiss francs at a

Show how to combine a currency swap paying Swiss francs at a floating rate and receiving Japanese yen at a floating rate with another currency swap to obtain a plain vanilla swap paying Swiss francs a...

Q: Consider a currency swap for $10 million and SF 15 million

Consider a currency swap for $10 million and SF 15 million. One party pays dollars at a fixed rate of 9 percent, and the other pays Swiss francs at a fixed rate of 8 percent. The payments are made sem...

Q: Find the value of an American put option using the binomial option

Find the value of an American put option using the binomial option pricing model. The parameters are S 62, X 70, r 0.08, u 1.10, and d 0.95. There are no dividends. Use n 2 periods.

Q: What is the difference between a long forward position and a short

What is the difference between a long forward position and a short forward position?

Q: You would like to speculate on a rise in the price of

You would like to speculate on a rise in the price of a certain stock. The current stock price is $29 and a 3-month call with a strike price of $30 costs $2.90. You have $5,800 to invest. Identify two...

Q: A company enters into a forward contract with a bank to sell

A company enters into a forward contract with a bank to sell a foreign currency for K1 at time T1. The exchange rate at time T1 proves to be S1 (> K1). The company asks the bank if it can roll the con...

Q: A Treasury bond futures price is 103-12. The prices

A Treasury bond futures price is 103-12. The prices of three deliverable bonds are 115-06, 135-12, and 155-28. Their conversion factors are 1.0679, 1.2264, and 1.4169, respectively. Which bond is chea...