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Black-Scholes and Asset Value
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,350,000. Over the past five years, the price of land in the area has increased 7 percent per year, with an annual standard deviation of 30 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,500,000. The risk-free rate of interest is 5 percent per year, compounded continuously. How much should you charge for the option?
Investigate and identify the reasons for the difference in interest rates charged by various banks and financial institutions. Do you believe that tight control on overheads will enable a bank or a financial institution to be price competitive?
What assumptions did you have to make to qualify and quantify the risks? What additional information would have made the risk management planning process easier?
Companys main objective is to minimize cash flow risk and explain what the company- Explain what the company should do.
Explain how the credit portfolio study would facilitate or assist the liquidity management of the financial institution or bank.
Explain what is meant by reinvestment rate risk.- Compare the debt outstanding for US Airways and Southwest Airlines.
Compare and contrast risk identification techniques and describe how these could improve the planning and mitigation of potential hazards
How much money will she have in her bank account after five years and how much money will be in her account after five years?
MPT basically studies the correlations between the return of assets of various classes. Do you believe this fundamental difference nullifies the use of MPT principles in credit portfolio management?
Using the annual report from the company that you have selected for your Final Project (apple inc.), discuss the risks the company faces and the actions they take to mitigate those risks.
What should be the hedge ratio in the use of gasoline futures to hedge its exposure - what is the companys exposure measured in gallons of Liquid X?
Firewalls and Risk Management- Firewalls are evolving into more sophisticated and advanced devices. Explain how you would optimize the implementation of the firewall you chose
Write the introduction to the risk management plan exploring the risks types and risk trends associated with the banking industry with a particular emphasis on a publicly traded bank.
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