Questions from Corporate Finance

Q: Suppose the businesses in the previous problem use futures contracts to hedge

Suppose the businesses in the previous problem use futures contracts to hedge their temperature-related risk. Who do you think might accept the opposite risk?

Q: Construct Table 5.1 from the perspective of a seller,

Construct Table 5.1 from the perspective of a seller, providing a descriptive name for each of the transactions.

Q: Repeat the previous problem supposing that the brokerage fee is quoted as

Repeat the previous problem supposing that the brokerage fee is quoted as 0.3% of the bid or ask price. Previous Problem ABC stock has a bid price of $40.95 and an ask price of $41.05. Assume there i...

Q: Consider the bonds in Example 7.8. What hedge ratio

Consider the bonds in Example 7.8. What hedge ratio would have exactly hedged the portfolio if interest rates had decreased by 25 basis points? Increased by 25 basis points? Repeat assuming a 50-basis...

Q: Using the base case parameters, plot the implied volatility curve you

Using the base case parameters, plot the implied volatility curve you obtain for the base case against that for the case where there is a jump to zero, with the same λ.

Q: Obtain at least 5 years of daily data for at least three

Obtain at least 5 years of daily data for at least three stocks and, if you can, one currency. Estimate annual volatility for each year for each asset in your data. What do you observe about the patte...

Q: a. Suppose you enter into a short 6-month forward

a. Suppose you enter into a short 6-month forward position at a forward price of $50. What is the payoff in 6 months for prices of $40, $45, $50, $55, and $60? b. Suppose you buy a 6-month put option...

Q: What position is the opposite of a purchased call? The opposite

What position is the opposite of a purchased call? The opposite of a purchased put?

Q: Suppose you desire to short-sell 400 shares of JKI stock

Suppose you desire to short-sell 400 shares of JKI stock, which has a bid price of $25.12 and an ask price of $25.31. You cover the short position 180 days later when the bid price is $22.87 and the a...

Q: Compute estimated profit in 1 year if XYZ buys a put option

Compute estimated profit in 1 year if XYZ buys a put option with a strike of $0.95, $1.00, or $1.05. Draw a graph of profit in each case.