Questions from Corporate Finance

Q: Estimate a GARCH (1,1) for the S&

Estimate a GARCH (1,1) for the S&P 500 index, using data from January 1999 to December 2003.

Q: Using the information in Table 8.9, what are the

Using the information in Table 8.9, what are the euro-denominated fixed rates for 4- and 8-quarter swaps?

Q: Use the same inputs as in the previous problem. Suppose that

Use the same inputs as in the previous problem. Suppose that you observe a bid option price of $50 and an ask price of $50.10. a. Explain why you cannot compute an implied volatility for the bid price...

Q: You have been asked to construct an oil contract that has the

You have been asked to construct an oil contract that has the following characteristics: The initial cost is zero. Then in each period, the buyer pays S −
, with a cap of $21.90 −
and a floor of $19...

Q: Repeat the previous problem, except that instead of hedging volatility risk

Repeat the previous problem, except that instead of hedging volatility risk, you wish to hedge interest rate risk, i.e., to rho-hedge. In addition to delta-, gamma-, and rho-hedging, can you delta-gam...

Q: A chooser option (also known as an as-you-

A chooser option (also known as an as-you-like-it option) becomes a put or call at the discretion of the owner. For example, consider a chooser on the S&R index for which both the call, with value C (...

Q: Consider again the Netscape PEPS discussed in this chapter and assume the

Consider again the Netscape PEPS discussed in this chapter and assume the following: the price of Netscape is $39.25, Netscape is not expected to pay dividends, the interest rate is 7%, and the 5-year...

Q: Firm A has a stock price of $40 and has made

Firm A has a stock price of $40 and has made an offer for firm B where A promises to pay $60/share for B, as long as A’s stock price remains between $35 and $45. If the price of A is below $35, A will...

Q: Repeat Problem 17.18 assuming that the volatility of gold is

Repeat Problem 17.18 assuming that the volatility of gold is 20% and that once opened, the mine can be costlessly shut down forever. What is the value of the mine? What is the price at which the mine...

Q: Consider Example 6.1. Suppose the February forward price had

Consider Example 6.1. Suppose the February forward price had been $2.80. What would the arbitrage be? Suppose it had been $2.65. What would the arbitrage be? In each case, specify the transactions and...