Questions from Business Statistics

Q: Determine the price of an average price Asian call option. Use

Determine the price of an average price Asian call option. Use an exercise price of 95. Count the current price in determining the average. Comment on whether you would expect a standard European call...

Q: Determine the prices of lookback and modified lookback calls and puts.

Determine the prices of lookback and modified lookback calls and puts. For the modified lookbacks, use an exercise price of 95.

Q: Identify and explain the primary methods of managing credit risk for derivatives

Identify and explain the primary methods of managing credit risk for derivatives dealers.

Q: Referring to problem 15, suppose transaction costs amounted to 0.

Referring to problem 15, suppose transaction costs amounted to 0.5 percent of the value of the stock index. Explain how these costs would affect the profitability and the incidence of index arbitrage....

Q: Compare and contrast total return swaps, credit default swaps, and

Compare and contrast total return swaps, credit default swaps, and interest rate swaps.

Q: Consider a firm that has assets that generate cash but which cannot

Consider a firm that has assets that generate cash but which cannot be easily valued on a regular basis. What are the difficulties faced by this firm when using VAR, and what alternatives would it hav...

Q: Explain how the stockholders of a company hold an implicit put option

Explain how the stockholders of a company hold an implicit put option written by the creditors.

Q: Another consideration in evaluating option strategies is the effect of transaction costs

Another consideration in evaluating option strategies is the effect of transaction costs. Suppose that purchases and sales of an option incur a brokerage commission of 1 percent of the option’s value....

Q: Identify the five types of credit derivatives and briefly describe how each

Identify the five types of credit derivatives and briefly describe how each works.

Q: Suppose your firm is a derivatives dealer that has recently created a

Suppose your firm is a derivatives dealer that has recently created a new product. In addition to market and credit risk, what additional risks does it face that are associated more with new products?...