MFIN6003 Derivative Securities Dr. Huiyan Qiu TVM and No-Arbitrage Principle: practice questions and problems Work on the following problems to check your knowledge on the time value of money and no-arbitrage principle. 1. An interest rate is quoted as 5% per annum with semiannual compounding. What is the equivalent rate with (a) annual compounding‚ (b) monthly compounding‚ and (c) continuous compounding? 2. An investor receives $1‚100 in one year in return for an investment of $1‚000 now
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CHAPTER 3 Arbitrage and Financial Decision Making Chapter Synopsis 3.1 Valuing Decisions When considering an investment opportunity‚ a financial manager must systematically compare the costs and benefits associated with the project in order to determine whether it is worthwhile. Determining the cash value today of the costs and benefits is one way to make such a comparison. In a competitive market‚ a good can be bought and sold at the same price‚ so the market price can be used to determine
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the local currency. Hence the whole operation seems risky‚ some coverage should apply. Task 2. Suggest how you could attempt covered interest arbitrage. What is the expected return from using covered interest arbitrage? The currency risk needs to be covered to avoid exposure and make riskless profit from the forward premium. Covered Interest Arbitrage could mean exchanging dollars for the foreign currency at the spot rate now‚ investing the currency in the funds and then‚ after a year‚ selling
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on Power Tie Corporation. The CEO of Mebel Doran & Company‚ Harvey Hegarty found out the M&A group of his Company had consulted the arbitrage desk about few specifics of Knox Corporation. The M&A and the arbitrage group would consult each other at times in order to structure effective financial strategies for the client‚ however‚ when inquired with the arbitrage group‚ the CEO found out that the arbitrageurs within the Company used to be in touch with other arbitragers in the market for information
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Transnational Management: Applied to the Case of Groupon Maastricht University School of Business and Economics Maastricht‚ Dec. 4th‚ 2012 Course: Global Business Table of contents Page 1. Introduction 2 2. Business model 3 3. Organizational Structure 4 4. Groupon’s corporate strategy 5 5. Groupons global strategy 6 6. Groupon’s entry to China 7 7. An Evolving Role 10 8. Conclusion 11 9. References 12 10. Appendix 13 1
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Abstract—The volatility of the Scandinavian international future energy market is examined based on a well known intra-day range-based measure of volatility. The main purpose of the paper is to identify determinants of the energy market’s intra-day volatility. Firstly‚ the investigation is a contract-by-contract‚ range-based volatility measure. The findings are (1) long memory in volatility the longest contracts (year)‚ but not for the shortest (month)‚ (2) the first difference contemporaneous
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Summary: The case discusses about the operation of the world’s largest convenience store chain Seven-Eleven in Japan‚ and the way it became Japan’s top leading super market chain. Seven–Eleven started its operation in Japan in November 1973 under an area licensing agreement between Ito-Yokado Co.‚ Ltd.‚ and The Southland Corporation. With more than 15‚500 stores worldwide‚ Seven-Eleven Japan Co.‚ Ltd (SEJ) franchises 6‚900 stores in Japan and most of the remaining stores located in North America
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was created as a result of a merge between Netherlands’ Royal Dutch and UK’s Shell Corporation. The case looks at the issue of price differentials between several equity listings in different markets from the perspective of investors seeking an arbitrage opportunity. Royal Dutch trades more actively in the Netherlands and U.S. markets‚ whereas Shell trades more actively in the United States. The result is that the Royal Dutch/Shell relative price moves positively with the Netherlands and U.S. markets
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Chapter 4 2. Inflation Effects on Exchange Rates. Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal‚ how should this affect the (a) U.S. demand for Canadian dollars‚ (b) supply of Canadian dollars for sale‚ and (c) equilibrium value of the Canadian dollar? ANSWER: Demand for Canadian dollars should increase‚ supply of Canadian dollars for sale should decrease‚ and the Canadian dollar’s value should increase. 3. Interest Rate Effects on
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L’Oreal: Global Brand‚ Local Knowledge 1. Outline the various conflicting demands on L’Oreal in the international context and their relative importance. What tradeoffs do you see among them? The conflicting demands are: Global Integration Local responsiveness Leveraging knowledge (local to Global) Global Integration: L’Oreal is one of the world ’s most progressive companies and it is being honored for creating a corporate culture that embraces and drives diversity throughout the company
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