Explain the differences between Capital Market Line (CML) and Security Market Line (SML). Do you agree that if there were no riskless assets in the economy. then there would be no SML? Please give your explanation.
Define the ‘Delta’ and ‘Gamma’ of a call option using some graphical interpretation carefully. Illustrate Delta-neutral and Gamma-neutral hedging by setting up examples.
Empirical evidence show that the mnelation between asset returns tends to increase during periods of high volatility. in particular during crashes; however. there is no significant correlation in boom markets.
Especially with regard to stock exchanges. This phenomenon is known as asymmetric correlation seen in Ang and Chen (2002). please discuss the possible implications to portfolio investment.