Homework: Derivatives and Risk Management
Find the price of AMD shares on the day you do this homework. Using any online options calculator, find the current volatility and risk-free rate applicable for AMD options.
In each case, explain the rationale for establishing these strategies. Then provide a table showing the relationship between the profit and final stock price.
Note: You can ignore the impact of discounting.
1) A bull spread using European call options with strike prices approximately $10 below and $5 below the spot price chosen and a maturity of 3 months.
2) A bear spread using European put options with strike prices approximately $10 below and $5 below the spot price chosen and a maturity of 3 months.
3) A butterfly spread using European call options with strike prices approximately $10 below and above the spot price chosen and two nearest the money calls and a maturity of 3 months.
4) A straddle using options with a strike price of approximately $5 below and a 3-month maturity.
5) A strangle using options with strike prices approximately $10 below and $10 above the spot price chosen and a 3-month maturity.
Format your homework according to the following formatting requirements:
(1) The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
(2) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
(3) Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.
Attachment:- Derivatives-and-Risk-Management-Alternative-Homework.rar