Art, Music, and Creative Writing homework help
Art, Music, and Creative Writing homework help. In each of the following cases, identify what risk the manager of an FI faces and whether the risk should be hedged by buying a put or a call option. a. A commercial bank plans to issue CDs in three months. b. An insurance company plans to buy bonds in two months. c. A thrift plans to sell Treasury securities next month. d. A U.S. bank lends to a French company with the loan payable in euros. e. A mutual fund plans to sell its holding of stock in a British company. f. A finance company has assets with a duration of six years and liabilities with a duration of 13 years. 5. Derive the upper and lower bound for a six?month call option with strike price K=$75 on stock XYZ. The spot price is $80. The risk?free interest rate (annually compounded) is 10%. If the option price is below the lower bound, describe the arbitrage strategy. 6. A European call option and put option on a stock both have a strike price of $20 and an expiration date in 3 months. Both sell for $3. The risk?free interest rate is 10% per annum. Current stock price is $19. Identify the arbitrage opportunity open to a trader. 7. Calculate the option value for a one?period European put option with a current stock price of $100, a strike price of $95. The one period risk free rate is 5%. The stock price can either go up or down by 10% at the end of one period.
Talk to us support@bestqualitywriters.com