Week 10 review questions
金融quiz代做 On the diagram you drew in Q4, assume the following information: X=10, S=7, p=1. Show the respective information on the diagram
- What is the difference between a ‘covered’ versus a ‘naked’ option position?
- Draw a net payoff diagram for a long call option.
- On the diagram you drew in Q2, assume the following information: X=5, S=10, c=2. Show the respective information including the payoff on the diagram. 金融quiz代做
- Draw a net payoff diagram for a short put option.
- On the diagram you drew in Q4, assume the following information: X=10, S=7, p=1. Show the respective information on the diagram including the payoff.
Can an option with zero intrinsic value have a positive price? Explain. 金融quiz代做
- What are the major differences between an equity warrant and an option contract?
- Outline the steps in deriving/proving the ‘bounds’ on option prices relative to their underlying asset prices.
- Why is a call option never worth more than the value of its underlying asset?
- Define the put call parity relationship and prove an arbitrage opportunity exists if the equality of the relationship is violated. 金融quiz代做
- Explain the payoff in different states of the world to bond holders under the Modigliani-Miller theorem.
- Explain the obligation on the writer of a put option over a futures contract upon exercise.
- Check the calculation of the net effective interest rate in the table provided on p502 of Bailey when the market rate of interest is 7%.