Questions from Business Statistics

Q: Sample Application F in the DerivaGem Application Builder Software considers the static

Sample Application F in the DerivaGem Application Builder Software considers the static options replication example in Section 26.17. It shows the way a hedge can be constructed using four options (as...

Q: Consider a down-and-out call option on a foreign

Consider a down-and-out call option on a foreign currency. The initial exchange rate is 0.90, the time to maturity is 2 years, the strike price is 1.00, the barrier is 0.80, the domestic risk-free int...

Q: Explain the difference between a forward start option and a chooser option

Explain the difference between a forward start option and a chooser option.

Q: Suppose that a stock index is currently 900. The dividend yield

Suppose that a stock index is currently 900. The dividend yield is 2%, the risk-free rate is 5%, and the volatility is 40%. Use the results in Technical Note 27 on the author’s website to calculate th...

Q: Use the DerivaGem Application Builder software to compare the effectiveness of daily

Use the DerivaGem Application Builder software to compare the effectiveness of daily delta hedging for (a) the option considered in Tables 19.2 and 19.3 and // (b) an average price call with the sam...

Q: In the DerivaGem Application Builder Software modify Sample Application D to test

In the DerivaGem Application Builder Software modify Sample Application D to test the effectiveness of delta and gamma hedging for a call on call compound option on a 100,000 units of a foreign curren...

Q: Outperformance certificates (also called ‘‘sprint certificates,’’ ‘‘accelerator

Outperformance certificates (also called ‘‘sprint certificates,’’ ‘‘accelerator certificates,’’ or ‘‘speeders’’) are offered to investors by many European banks as a way of investing in a company’s st...

Q: Suppose that the volatilities used to price a 6-month currency

Suppose that the volatilities used to price a 6-month currency option are as in Table 20.2. Assume that the domestic and foreign risk-free rates are 5% per annum and the current exchange rate is 1.00....

Q: Repeat the analysis in Section 27.8 for the put option

Repeat the analysis in Section 27.8 for the put option example on the assumption that the strike price is 1.13. Use both the least squares approach and the exercise boundary parameterization approach....

Q: A European call option on a non-dividend-paying stock

A European call option on a non-dividend-paying stock has a time to maturity of 6 months and a strike price of $100. The stock price is $100 and the risk-free rate is 5%. Use DerivaGem to answer the f...