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a firm is interested in purchasing an interest rate cap from a bank it has received an offer price from the bank but
consider a three-year receiver swaption with an exercise rate of 1175 percent in which the underlying swap is a 20
suppose your firm had issued a 12 percent an- nual coupon 15-year bond callable at par at the 8th year it is now two
a firm has previously issued fixed rate non- callable debt because interest rates are perceived to be temporarily high
assume the 30-day libor is 5 percent and the 120-day libor is 6 percent this implies a continuously compounded 90-day
consider a call option with an exercise rate of x on an interest rate which we shall denote as simply l the
1 explain the advantages and disadvantages of implementing portfolio insurance using stock and puts in
demonstrate that the payoffs of a chooser option with an exercise price of x and a time to expiration of t that
1 explain how weather derivatives could be used by an electric utility to manage the risk associated with power
on july 5 a market index is at 49254 you hold a portfolio that duplicates the index and is worth 20500 times the index
use the information in problem 9 to set up a dynamic hedge using stock index futures as- sume a multiplier of 500 the
determine the price of an average price asian call option use an exercise price of 95 count the current price in
1 determine the prices of lookback and modified lookback calls and puts for the modified look- backs use an exercise
a portfolio manager is interested in purchasing an instrument with a call option-like payoff but does not want to have
consider a stock priced at 100 with a volatility of 25 percent the continuously compounded risk- free rate is 5 percent
a stock is priced at 12537 the continuously compounded risk-free rate is 44 percent and the volatility is 21 percent
consider a 10-year fixed-rate mortgage of 500000 that has an interest rate of 12 percent for simplification assume that
an investment manager expects a stock to be quite volatile and is considering the purchase of either a straddle or a
suppose frm inc issued a zero-coupon equity index-linked note with a five-year maturity the par value is 1000 and the
suppose you are asked to assist in the design of an equity-linked security the instrument is a five-year zero coupon
a convertible bond is a bond that permits the holder to turn in the bond and convert it into a certain number of shares
1 identify and explain the primary methods of managing credit risk for derivatives dealers2 identify
1 critique each of the three methods of calculating value at risk giving one advantage and one disadvantage of
1 explain how closeout netting reduces the credit risk for two firms engaged in several derivatives contracts2
1 explain how the stockholders of a company hold an implicit put option written by the creditors2