Questions from Business Statistics

Q: An American put option to sell a Swiss franc for dollars has

An American put option to sell a Swiss franc for dollars has a strike price of $0.80 and a time to maturity of 1 year. The Swiss franc’s volatility is 10%, the dollar interest rate is 6%, the Swiss fr...

Q: The treasurer of a corporation is trying to choose between options and

The treasurer of a corporation is trying to choose between options and forward contracts to hedge the corporation’s foreign exchange risk. Discuss the advantages and disadvantages of each.

Q: Use equation (22.1) to show that when the

Use equation (22.1) to show that when the loss distribution is normal, VaR with 99% confidence is almost exactly the same as ES with 97.5% confidence. equation (22.1)

Q: What is the difference between the over-the-counter market

What is the difference between the over-the-counter market and the exchange-traded market? What are the bid and offer quotes of a market maker in the over-the-counter or exchange-traded market?

Q: Explain how the ‘‘cure period’’ is used in the calculation of

Explain how the ‘‘cure period’’ is used in the calculation of CVA.

Q: It is now October 2017. A company anticipates that it will

It is now October 2017. A company anticipates that it will purchase 1 million pounds of copper in each of February 2018, August 2018, February 2019, and August 2019. The company has decided to use the...

Q: The 6-month, 12-month, 18-month

The 6-month, 12-month, 18-month, and 24-month zero rates are 4%, 4.5%, 4.75%, and 5%, with semiannual compounding. (a) What are the rates with continuous compounding? (b) What is the forward rate for...

Q: Show that, if the futures price of a commodity is greater

Show that, if the futures price of a commodity is greater than the spot price during the delivery period, then there is an arbitrage opportunity. Does an arbitrage opportunity exist if the futures pri...

Q: The following table gives the prices of bonds: /

The following table gives the prices of bonds: (a) Calculate zero rates for maturities of 6 months, 12 months, 18 months, and 24 months. (b) What are the forward rates for the following periods: 6 mon...

Q: What is meant by the term ‘‘agency costs’’? How did

What is meant by the term ‘‘agency costs’’? How did agency costs play a role in the credit crisis?