Questions from Business Statistics

Q: What trading position is created from a long strangle and a short

What trading position is created from a long strangle and a short straddle when both have the same time to maturity? Assume that the strike price in the straddle is halfway between the two strike pric...

Q: Explain the difference between bilateral and central clearing for OTC derivatives.

Explain the difference between bilateral and central clearing for OTC derivatives.

Q: Is the futures price of a stock index greater than or less

Is the futures price of a stock index greater than or less than the expected future value of the index? Explain your answer.

Q: A 1-year long forward contract on a non-dividend

A 1-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 5% per annum with continuous compounding. (a) What are t...

Q: Suppose the current USD/euro exchange rate is 1.2000

Suppose the current USD/euro exchange rate is 1.2000 dollar per euro. The six-month forward exchange rate is 1.1950. The six-month USD interest rate is 1% per annum continuously compounded. Estimate t...

Q: It is July 30, 2018. The cheapest-to-

It is July 30, 2018. The cheapest-to-deliver bond in a September 2018 Treasury bond futures contract is a 13% coupon bond, and delivery is expected to be made on September 30, 2018. Coupon payments on...

Q: A trader is looking for arbitrage opportunities in the Treasury bond futures

A trader is looking for arbitrage opportunities in the Treasury bond futures market. What complications are created by the fact that the party with a short position can choose to deliver any bond with...

Q: Suppose that the 9-month LIBOR interest rate is 8%

Suppose that the 9-month LIBOR interest rate is 8% per annum and the 6-month LIBOR interest rate is 7.5% per annum (both with actual/365 and continuous compounding). Estimate the 3-month Eurodollar fu...

Q: Suppose that the 300-day LIBOR zero rate is 4%

Suppose that the 300-day LIBOR zero rate is 4% and Eurodollar quotes for contracts maturing in 300, 398, and 489 days are 95.83, 95.62, and 95.48. Calculate 398-day and 489-day LIBOR zero rates. Assum...

Q: Suppose that it is February 20 and a treasurer realizes that on

Suppose that it is February 20 and a treasurer realizes that on July 17 the company will have to issue $5 million of commercial paper with a maturity of 180 days. If the paper were issued today, the c...