efficient frontier. Interpret your results in comparison to the two asset case in a). 2) Assume that on 1/8/2012‚ when the WBK share price was S= AUD 22.5 a trader has sold 200‚000 European WBK call options with strike price K=25 and expiration date 1/11/2012. Suppose that the amount received for the options was AUD 200‚000. Further assume that the yearly
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alternative was to sell yen for dollars at a predetermined price in the future using a forward contract. The second alternative was to purchase a yen put option allowing them to exercise their option only if it was more profitable in the future at the future spot rate. Two more alternatives that we think are appropriate are a synthetic forward using options and a synthetic forward using interest rate parity. Furthermore‚ Tiffany needs to understand the hedging alternatives and determine what‚ if any‚
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FINANCIAL RISK MANAGEMENT FREQUENTLY ASKED QUESTIONS Module 1 – Introduction to financial risk management 1. What are the major categories of risk? Please provide examples. (Topic heading: Main categories of risk controls SG 1.32) Seven categories of risk are outlined. These are summarised in the table below: Type of risk Definition Example Liquidity The risk of not being able to pay back what you owe due to the inability to convert assets into cash quickly‚ without materially
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cedis/$ 1.95 Expected spot exchange rate in 6 months‚ cedis/$ 2.00 Options on Ghanaian cedis: Call Option Put Option Strike price‚ cedis/$ 2.00 2.00 Option premium (percent) 2.00% 3.00% United States Ghana Six-month interest rate for borrowing (per annum) 4.00% 8.00% Six-month interest rate for investing (per annum) 2.00% 6.00% (a) If the company wants to offset their exposure‚ what options they have? And which one is the best? Why? Q2. From base price levels
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instruments are the following: * Recommendation from Yahoo‚ TD Ameritrade and other websites. * Price pattern * High or moderate P/E ratio * Seasons (spring‚ summer‚ fall and winter) for the commodities * Class lessons on option for option strategies I used the seasons to buy 2000 of iPath S&P GSCI Crude Oil Total Return Index ETN and 10 April futures on gaz. I used the thought that as we were still in winter when the project began that people would use more
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On Constructing a Market Consistent Economic Scenario Generator Ebba K. Baldvinsdóttir & Lina Palmborg March 4‚ 2011 Abstract Recently the insurance industry has started to realise the importance of properly managing options and guarantees embedded in insurance contracts. Interest rates have been low in the last few years‚ which means that minimum interest rate guarantees have moved from being far out-of-the money to expiring inthe-money. As a result‚ many insurance companies have experienced
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Week 9: The Black-Scholes Solution And The “Greeks” (see also Wilmott‚ Chapter 6‚7) Lecture VIII.1 Plain Vanilla The goal of the next two lectures is to obtain the Black-Scholes solutions for European options‚ which belong to the type of basic contingent claims called ‘vanilla options’. These lectures may seem a bit too technical. However‚ I think‚ it is important to have at least some idea about how the BS equation is solved for various financial instruments. I will try my best to keep things
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prices. Volatility can be characterized as historical or implied. Historical volatility measure stock price changes by using historical stock price data‚ while implied volatility is a stock’s current volatility‚ which is measured by using the stock’s option price. According to Fischer‚ volatility creates inconsistency in price trends; this results in a situation at which formulas for volatility can be changed according to the predictability of volatility. Fischer identified four factors that affect
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TABLE OF CONTENTS Page no Introduction 3 1. Employee Stock Option Plan 4 Advantages Disadvantages Examples 2. Profit Sharing 5 Advantages Disadvantages Examples 3. Gain Sharing 7 Advantages Disadvantages 4. Scanlon Plan 8 Advantages Disadvantages 5. Rucker Plan
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paper analyzing the risk exposure and risk management of a company or industry. Guidelines for this research project are given at the end of this syllabus. Course Subject and Objectives This course focuses on forward contracts‚ futures contracts‚ options and swaps. By the end of the term students will learn how these contracts work‚ how they are used for risk management‚ and how they are priced. This subject belongs to the field of quantitative finance and traditionally it is referred to as “financial
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