Determine the 5 year flat volatility for caps and floors

Assignment Help Financial Econometrics

Reference no: EM131241116

Suppose that the 1-year, 2-year, 3-year, 4-year, and 5-year zero rates are 6%, 6.4%, 6.7%, 6.9%, and 7%. The price of a 5-year semiannual cap with a principal of $100 at a cap rate of 8% is $3. Use DerivaGem to determine:

(a) The 5-year flat volatility for caps and floors.

(b) The floor rate in a zero-cost 5-year collar when the cap rate is 8%.

Reference no: EM131241116

Questions Cloud

Difference in elevation of the free surfaces of the tanks : Water flows from one large tank to another at a rate of 0.50 ft3 /s through a horizontal 3-in.-diameter cast-iron pipe of length 200 ft. If minor losses are neglected, determine the difference in elevation of the free surfaces of the tanks.

Analyze current events article : Please analyze a Current Events Article which deals with a highly competitive industry in a field such as medicine, technology, or manufacturing. Explain if there is the potential for changes in the industry due to globalization or technology? Please..

How adr is different from the traditional court system : Explain the origins of the U.S. judicial system and how the judicial system fits into society -- including business. Differentiate the federal court structure from your state's court structure. Discuss the concept of judicial review.

Space between the plates : A parallel plate capacitor with a plate area of 22.0 cm2 and air in the space between the plates, which are separated by 2.5 mm, is connected to a 24.0-V battery. If the plates are pulled back so that the separation increases to 4.5 mm, how much w..

Determine the 5 year flat volatility for caps and floors : Use DerivaGem to determine the 5-year flat volatility for caps and floors. - The floor rate in a zero-cost 5-year collar when the cap rate is 8%.

Formula for arc price elasticity what is percentage in price : IF the price of a slice of pizza rises from $2,50 to $3, and quantity demanded falls from 10,000 slices to 7,400 slices, using the formula for arc price elasticity what is the percentage in price? The market demand for wheat is Q=100-2p+1pb+2y. If th..

How long it takes charge to leave the capacitor : A 5.0 x 10^6 Ohm resistor is connected in series with a 4.0 x 10^-6 F capacitor. If the capacitor is discharged, what is the value (in seconds) of the "time constant" that characterizes how long it takes charge to leave the capacitor?

Analysis of variance relating casual to weekday : MATH 4044 - Statistics for Data Science Assignment. Carry out a one-way analysis of variance relating casual to weekday. Use contrasts to test at least one a-priori hypothesis of your choice. Examine and comment on residuals. Also carry out appropr..

Determine the pressure drop per 100-m length of horizontal : Determine the pressure drop per 100-m length of horizontal new 0.20-m-diameter cast iron water pipe when the average velocity is 1.7 m/s.

User Account

All Pages