Questions from Business Statistics

Q: Explain how an aggressive bear spread can be created using put options

Explain how an aggressive bear spread can be created using put options.

Q: A currency swap has a remaining life of 15 months. It

A currency swap has a remaining life of 15 months. It involves exchanging interest at 10% on £20 million for interest at 6% on $30 million once a year. The term structure of riskfree interest rates in...

Q: A stock price is currently $40. It is known that

A stock price is currently $40. It is known that at the end of 1 month it will be either $42 or $38. The risk-free interest rate is 8% per annum with continuous compounding. What is the value of a 1-m...

Q: A stock price is currently $80. It is known that

A stock price is currently $80. It is known that at the end of 4 months it will be either $75 or $85. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a 4-...

Q: A stock price is currently $40. It is known that

A stock price is currently $40. It is known that at the end of 3 months it will be either $45 or $35. The risk-free rate of interest with quarterly compounding is 8% per annum. Calculate the value of...

Q: Suppose that 3-month, 6-month, 12-

Suppose that 3-month, 6-month, 12-month, 2-year, and 3-year OIS rates are 2.0%, 2.5%, 3.2%, 4.5%, and 5%, respectively. The 3-month, 6-month, and 12-month OISs involve a single exchange at maturity; t...

Q: A stock price is currently $50. Over each of the

A stock price is currently $50. Over each of the next two 3-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. What is...

Q: OIS rates have been estimated as 3.4% for all

OIS rates have been estimated as 3.4% for all maturities. The three-month LIBOR rate is 3.5%. For a six-month swap where payments are exchanged every three months the swap rate is 3.6%. All rates are...

Q: For the situation considered in Problem 13.12, what is

For the situation considered in Problem 13.12, what is the value of a 6-month European put option with a strike price of $51? Verify that the European call and European put prices satisfy put–call par...

Q: Explain carefully the difference between writing a put option and buying a

Explain carefully the difference between writing a put option and buying a call option.