Questions from Business Statistics

Q: Consider a portfolio of options on a single asset. Suppose that

Consider a portfolio of options on a single asset. Suppose that the delta of the portfolio is 12, the value of the asset is $10, and the daily volatility of the asset is 2%. Estimate the 1-day 95% VaR...

Q: A company has a long position in a 2-year bond

A company has a long position in a 2-year bond and a 3-year bond, as well as a short position in a 5-year bond. Each bond has a principal of $100 and pays a 5% coupon annually. Calculate the company’s...

Q: A bank has written a call option on one stock and a

A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to ma...

Q: Suppose that a stock price has an expected return of 16%

Suppose that a stock price has an expected return of 16% per annum and a volatility of 30% per annum. When the stock price at the end of a certain day is $50, calculate the following: (a) The expected...

Q: Suppose that mezzanine tranches of the ABS CDOs, similar to those

Suppose that mezzanine tranches of the ABS CDOs, similar to those in Figure 8.3, are resecuritized to form what is referred to as a ‘‘CDO squared.’...

Q: Repeat Problem 19.12 for a financial institution with a portfolio

Repeat Problem 19.12 for a financial institution with a portfolio of short positions in put and call options on a currency. Data from Problem 19.12: A company uses delta hedging to hedge a portfolio o...

Q: (a) Company X has been offered the swap quotes in

(a) Company X has been offered the swap quotes in Table 7.3. It can invest for four years at 2.8%. What floating rate can it swap this fixed rate into? (b) Company Y has been offered the swap quote...

Q: The one-year LIBOR rates is 3%, and the LIBOR

The one-year LIBOR rates is 3%, and the LIBOR forward rate for the 1- to 2-year period is 3.2%, respectively. The three-year swap rate for a swap with annual payments is 3.2%. What is the LIBOR forwar...

Q: It is April 7, 2017. The quoted price of a

It is April 7, 2017. The quoted price of a U.S. government bond with a 6% per annum coupon (paid semiannually) is 120-00. The bond matures on July 27, 2033. What is the cash price? How does your answe...

Q: Sixty futures contracts are used to hedge an exposure to the price

Sixty futures contracts are used to hedge an exposure to the price of silver. Each futures contract is on 5,000 ounces of silver. At the time the hedge is closed out, the basis is $0.20 per ounce. Wha...