Discuss the different types of options gp stanley

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G.P. Stanley is an investment bank that has a wide range of financial products on its balance sheet. In addition to G.P. Stanley's share and debt securities, it hedges its asset risk by taking various derivative products such as option, swap and futures contracts.

A. Identify and discuss the different types of options G.P Stanley may have available in their portfolios. Use examples and graphs to support your discussion.

B. Given G.P. Stanley has swap contracts in the portfolios, explain how an interest rate swap is different from a long-term debt security.

C. G.P. Stanley has a corporate client who came for a vanilla swap. The corporate client agreed to pay for a six-month BBSW on $3 million to G.P Stanley who offered a fixed interest rate of 9.5% p.a. The interest payment is settled every six months. If at the first reset date, the six-month BBSW is 8% p.a., calculate the cash payment exchanged between the two parties at the first reset date.

Reference no: EM133004911

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