European calls, puts value with strike and expiration value
Explain the relationship between the European calls, puts value with similar strike and expiration value.
Expert
C − P = S − Ke−r(T−t)
This relationship, in among European calls (value C) and puts (value P) with similar strike (K) and expiration (T) valued at time t is an effect of a simple arbitrage argument. When you buy a call option, at similar time write a put and sell stock short. When the stock is above the strike at expiration therefore you will have S − K by the call, 0 by the put and −S by the stock. A total sum of −K. If the stock is below the strike at expiration you will have 0 from the call, −S again from the stock, and −(K − S) from the short put. Again a total sum of −K. Therefore, whatever the stock price is at expiration such portfolio will all the times be worth −K, a guaranteed amount. Because this amount is guaranteed we can discount this back to the present. We should have C − P − S =−Ke−r(T−t).
This is put–call parity.
Describe balance of payments identity and explain its implication under the fixed & flexible exchange rate regimes.The balance of payments identity holds that the combined balance on the current & capital accounts have to be equivalent i
Explain boundary/final conditions in Monte Carlo method.
Explain statistical modelling way of determine the model.
Question 1 Four European vanilla Call options Ci ( ⋅) on an underlier with no interim cash flows, have identicalmaturity T . Their strike prices K i are such that K1 < K 2 < K 3 < K 4 and all strikes are equallyspaced. Interest rates are equ
Explain how portfolio’s value for realization calculated? Give an example.
Illustrates an example an arbitrage opportunity?
How much will transaction costs decrease the profit?
Why Does Risk-Neutral Valuation Work?
factor responsible for surging the international investment portfolio
At the beginning of the year of 1996, the yearly interest rate was 6 percent in the United States and 2.8 percent in Japan. At the time the exchange rate was 95 yen per dollar. Mr. Jorus, the manager of a Bermuda-based hedge fund, thought that the substantial
18,76,764
1930774 Asked
3,689
Active Tutors
1423964
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!