Questions from Business Statistics

Q: A financial institution owns a portfolio of options on the U.

A financial institution owns a portfolio of options on the U.S. dollar–sterling exchange rate. The delta of the portfolio is 56.0. The current exchange rate is 1.5000. Derive an approximate linear rel...

Q: Suppose that a company has a portfolio consisting of positions in stocks

Suppose that a company has a portfolio consisting of positions in stocks and bonds. Assume that there are no derivatives. Explain the assumptions underlying (a) the linear model and (b) the historical...

Q: Explain why the linear model can provide only approximate estimates of VaR

Explain why the linear model can provide only approximate estimates of VaR for a portfolio containing options.

Q: Distinguish between the terms open interest and trading volume.

Distinguish between the terms open interest and trading volume.

Q: What is the difference between a local and a futures commission merchant

What is the difference between a local and a futures commission merchant?

Q: What is the difference between entering into a long forward contract when

What is the difference between entering into a long forward contract when the forward price is $50 and taking a long position in a call option with a strike price of $50?

Q: Under what circumstances does a minimum variance hedge portfolio lead to no

Under what circumstances does a minimum variance hedge portfolio lead to no hedging at all?

Q: An investor enters into a short forward contract to sell 100,

An investor enters into a short forward contract to sell 100,000 British pounds for U.S. dollars at an exchange rate of 1.5000 USD per pound. How much does the investor gain or lose if the exchange ra...

Q: Suppose that the standard deviation of quarterly changes in the prices of

Suppose that the standard deviation of quarterly changes in the prices of a commodity is $0.65, the standard deviation of quarterly changes in a futures price on the commodity is $0.81, and the coeffi...

Q: Show by substituting for the various terms in equation (19.

Show by substituting for the various terms in equation (19.4) that the equation is true for: (a) A single European call option on a non-dividend-paying stock (b) A single European put option on a non-...