Questions from Business Statistics

Q: The 2-month interest rates in Switzerland and the United States

The 2-month interest rates in Switzerland and the United States are, respectively, 1% and 2% per annum with continuous compounding. The spot price of the Swiss franc is $1.0500. The futures price for...

Q: The spot price of silver is $25 per ounce. The

The spot price of silver is $25 per ounce. The storage costs are $0.24 per ounce per year payable quarterly in advance. Assuming that interest rates are 5% per annum for all maturities, calculate the...

Q: It is sometimes argued that a forward exchange rate is an unbiased

It is sometimes argued that a forward exchange rate is an unbiased predictor of future exchange rates. Under what circumstances is this so?

Q: What is the cost of carry for: (a)

What is the cost of carry for: (a) a non-dividend-paying stock (b) a stock index (c) a commodity with storage costs (d) a foreign currency.

Q: Explain why a futures contract can be used for either speculation or

Explain why a futures contract can be used for either speculation or hedging.

Q: Suppose that a March call option to buy a share for $

Suppose that a March call option to buy a share for $50 costs $2.50 and is held until March. Under what circumstances will the holder of the option make a profit? Under what circumstances will the opt...

Q: Suppose that you write a put contract with a strike price of

Suppose that you write a put contract with a strike price of $40 and an expiration date in 3 months. The current stock price is $41 and the contract is on 100 shares. What have you committed yourself...

Q: In the 1980s, Bankers Trust developed index currency option notes (

In the 1980s, Bankers Trust developed index currency option notes (ICONs). These were bonds in which the amount received by the holder at maturity varied with a foreign exchange rate. One example was...

Q: What would it mean to assert that the temperature at a certain

What would it mean to assert that the temperature at a certain place follows a Markov process? Do you think that temperatures do, in fact, follow a Markov process?

Q: It is May and a trader writes a September call option with

It is May and a trader writes a September call option with a strike price of $20. The stock price is $18 and the option price is $2. Describe the trader’s cash flows if the option is held until Septem...