1. Two Treasury bonds, A and B, have the same duration, but A has greater convexity than B
a During recessions, both bonds will lose value, and B will be affected more
b During recessions, both bonds will lose value, and A will be affected more
c During recessions, both bonds will gain value, and B will be affeceted more
d During recessions, both bonds will gain value, and A will be affected more
2. The stock price starts at around $120, ends at $105, and hits the barrier of $90 about halfway through the year.
(a) What is the payoff of the option: a 100-strike down-and-in put?
(b) What is the payoff of the option: a 100-strike down-and-out put?
(c) What is the payoff of the option: a 100-strike down-and-in call?