Questions from Business Statistics

Q: “The impact of DVA on earnings volatility is generally greater than

“The impact of DVA on earnings volatility is generally greater than that of CVA.” Explain this statement.

Q: Between October 30, 2018, and November 1, 2018,

Between October 30, 2018, and November 1, 2018, you have a choice between owning a U.S. government bond paying a 12% coupon and a U.S. corporate bond paying a 12% coupon. Consider carefully the day co...

Q: The 3-month Eurodollar futures price for a contract maturing in

The 3-month Eurodollar futures price for a contract maturing in 6 years is quoted as 95.20. The standard deviation of the change in the short-term interest rate in 1 year is 1.1%. Estimate the forward...

Q: An exchange rate is currently 1.0 and the implied volatilities

An exchange rate is currently 1.0 and the implied volatilities of 6-month European options with strike prices 0.7, 0.8, 0.9, 1.0, 1.1, 1.2, 1.3 are 13%, 12%, 11%, 10%, 11%, 12%, 13%. The domestic and...

Q: What do you think would happen if an exchange started trading a

What do you think would happen if an exchange started trading a contract in which the quality of the underlying asset was incompletely specified?

Q: Prove the result in equation (11.11). (Hint

Prove the result in equation (11.11). (Hint: For the first part of the relationship, consider (a) a portfolio consisting of a European call plus an amount of cash equal to D þ K, and (b) a portfolio c...

Q: If the volatility of a stock is 18% per annum,

If the volatility of a stock is 18% per annum, estimate the standard deviation of the percentage price change in (a) 1 day, (b) 1 week, and (c) 1 month.

Q: Explain why the forward interest rate is less than the corresponding futures

Explain why the forward interest rate is less than the corresponding futures interest rate calculated from a Eurodollar futures contract.

Q: How is the conversion factor of a bond calculated by the CME

How is the conversion factor of a bond calculated by the CME Group? How is it used?

Q: A Eurodollar futures price changes from 96.76 to 96.

A Eurodollar futures price changes from 96.76 to 96.82. What is the gain or loss to a trader who is long two contracts?