Discuss performance of the copper index

Assignment Help Finance Basics
Reference no: EM131731277

Question: Consider two indices: a gold index and a copper index. Consider a European option that pays 0% if the gold index has performance equal to or better than - 2% relative to the copper index. For each percentage point that the gold index return is worse than 2% below the copper index, the option pays 1% of its notional value. Describe the type of option and its strike price in terms of both calls and puts. Answer: The option is a spread option. In the case of a spread put, the strike price of the put is -2%, and the spread is defined as the performance of the gold index less the performance of the copper index. In the case of a spread call, the strike price of the call is +2%, and the spread is defined as the performance of the copper index less the performance of the gold index.

Reference no: EM131731277

Questions Cloud

Find the remaining value of the structured product : Consider a five-year zero-coupon cash-and-call position on the S&P 500 index that has an initial cost of $1,000 and offers $1,000 principal protection.
What would be good surrogate for pie slice values : Because Apple Inc "does not" generate profits, what would be a good surrogate for the pie slice values?
Define percent strength of each juice in the first solution : In the first solution pour 67mL of juice b and 29mL of juice. What is the percent strength of each juice in the first solution
Intangible benefits offered to the consumer : Why is it important for a customer to understand the main differences between the tangible and intangible benefits offered to the consumer?
Discuss performance of the copper index : Consider two indices: a gold index and a copper index. Consider a European option that pays 0% if the gold index has performance equal to or better.
What is the role of management in motivation : What is the role of management in motivation. Explain how the definition of public safety has changed over time?
Disadvantages for matrix project : Which of the following is one of the disadvantages for matrix project?
A client who was involved in a motor vehicle accident comes : A client who was involved in a motor vehicle accident comes into the ER distraught and complaining of leg pain
What effect slowing chinese economy on economy of canada : What will be the effect slowing Chinese economy on the economy of Canada and the Canadian dollar? Use the DD/AA model to explain and graph your answers

Reviews

Write a Review

Finance Basics Questions & Answers

  We learn from gorton that it is not possible to prove

We learn from Gorton that it is not possible to prove that had Lehman Brothers been bailed out by the government or the Federal Reserve the financial crisis of 2008 would not have occurred. This is an example of not being able to prove the "counterfa..

  Natural gas and gas products department

ConocoPhillips (COP) Natural Gas and Gas Products Department (NG&GP) manages all of the company's activities relating to the gathering, purchase, processing, and sale of natural gas and gas liquids. Chris Simpkins, a recent graduate, was recently ..

  Determine your current portfolio delta gamma

As described above, you have three instruments currently in your portfolio. Determine your current portfolio delta, gamma, and vega. Describe in words the risk properties of your portfolio based on your calculations.

  Organization about a recent change in the organization

Interview a HR leader or another leader in a management position in your organization about a recent change in the organization.

  At the starting of the year net fixed assets were 13800

titan football manufacturing had the following operating results for 2010 sales 19780 cost of goods sold 13980

  How does character development help control stress managemen

How does character development help control stress management, contribute to manners, and strengthen dealings with the public

  What role does growth in market share play

What role does growth in market share play in influencing the per share stock price? Why? What are some of competitive advantages of having a high market share?

  What is the expected value of new ghana''s property losses

Suppose PC Inc, New Ghana's insurance carrier, charges a 40% load when determining its property and casualty insurance premiums.  What would they charge New Ghana for property insurance, i.e., what will the premium be?

  What is the gamma of a share

What is the gamma of a share of stock if the stock price is $55, and a $50 call on the stock is priced at $7 while a $50 put is priced at $4?

  Compute the one-year spot rate

Compute the one-year spot rate. Compute the two- and three-year rates under the assumption that they are equal.

  Mortgage pool consists of interest only loans

Wells Fargo issues a CMBS. The mortgage pool consists of interest only loans, with a total loan amount of $15 million. Assume the mortgage rate is 11%, the mortgages are annually compounded, and the loan maturity is 4 years.

  Compute the given turnover ratios

Jim Short's Company makes clothing for schools. Sales in 20X1 were $4,490,000. Assets were as follows: Cash $ 110,000 Accounts receivable 864,000 Inventory 493,000 Net plant and equipment 504,000 Total assets $ 1,971,000.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd