Questions from Corporate Finance

Q: Suppose that a derivative claim makes continuous payments at the rate.

Suppose that a derivative claim makes continuous payments at the rate. Show that the Black-Scholes equation becomes For the following four problems, assume that S follows equation (21.5) and Q follow...

Q: Repeat the previous problem assuming that δ1= 0.05 and

Repeat the previous problem assuming that δ1= 0.05 and δ2 = 0.12. Verify that both procedures give a price of approximately $15.850. Previous Problem Suppose that S1 and S2 are correlated, non-divide...

Q: Suppose an option knocks in at H1> S, and knocks

Suppose an option knocks in at H1> S, and knocks out at H2 >H1. Suppose that K H1, it is not possible to hit H2 without hitting H1): What is the value of this option?

Q: Verify that the price of the 12% interest rate cap in

Verify that the price of the 12% interest rate cap in Figure 25.6 is $3.909.

Q: Compute the 95% 10-day tail VaR for the position

Compute the 95% 10-day tail VaR for the position in Problem 26.8. Problem 26.8. Compute the 95% 10-day VaR for a written strangle (sell an out-of-the-money call and an out-of-the-money put) on 100,00...

Q: Consider two firms, one with an FF rating and one with

Consider two firms, one with an FF rating and one with an FFF rating. What is the probability that after 4 years each will have retained its rating? What is the probability that each will have moved t...

Q: Short interest is a measure of the aggregate short positions on a

Short interest is a measure of the aggregate short positions on a stock. Check an online brokerage or other financial service for the short interest on several stocks of your choice. Can you guess whi...

Q: For Figure 2.8, verify the following:

For Figure 2.8, verify the following: a. The S&R index price at which the put option diagram intersects the x-axis is $924.32. b. The S&R index price at which the put option and forward cont...

Q: Compute estimated profit in 1 year if Telco buys paylater calls as

Compute estimated profit in 1 year if Telco buys paylater calls as follows (the net premium may not be exactly zero): a. Sell one 0.975-strike call and buy two 1.034-strike calls. b. Sell two 1.00-str...

Q: Suppose the S&P 500 index futures price is currently 1200

Suppose the S&P 500 index futures price is currently 1200. You wish to purchase four futures contracts on margin. a. What is the notional value of your position? b. Assuming a 10% initial margin, what...