Discuss the potential factors that shift yield curve upward

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Q1. Assume the put is overpriced ($4.785 > $4.495) and delta is -0.453 (=(Nd1)-1), if you take 1000 positions in the put, should you long or short put and what position will you take in the shares (how many shares will you trade and in what direction)?

Q2. Assume you observed that the entire nominal yield curve has been shifting upwards i.e. nominal yields have increased across all maturities. With the increasing yields it makes sense to expect stocks to perform worse, because higher discount rates should lead to lower valuations. However, equity markets have continued their runs to an all-time high. Discuss the potential factors that shift the yield curve upward.

Q3. Explain why there seems to be a disconnect between yields and equity valuation.

Reference no: EM132986154

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