Estimate the delta and the gamma for option

Reference no: EM133037112

Question 1:

You would like to purchase a call option for the high tech stock MCCA.

Assume today is April 29, 2021, before the market has opened.

MCCA
Option Type	Stock Price	IV	Strike Price	Exp	Vol	Open Int
Call	21.18	36.32%	20.00	May, 2021	3,051	40,421
	Annual interest rate =	3.00%			Trading days per year =	252

a) How many days (for price calculations) until the option expires?

b) Based on the information shown in the table to the right, create the complete daily binomial lattice for the stock price. Show your latttice.

c) Using a daily binomial lattice, calculate the option value. Show your option value lattice.

d) Estimate the delta and the gamma for option using the binomial lattice results.

Question 2:

You would like to purchase a put option for the high tech stock MCCA.

Assume today is April 29, 2021, before the market has opened.

MCCA
Option Type	Stock Price	IV	Strike Price	Exp	Vol	Open Int
Put	21.18	36.32%	20.00	May, 2021	3,051	40,421
	Annual interest rate =	3.00%			Trading days per year =	252

a) Based on the information shown in the table to the right, use the daily binomial lattice method to estimate the American put option value.
Show your lattice.

b) Based on the information shown in the table to the right, use the daily binomial lattice method to estimate the European put option value. Show your lattice.

Question 3:

Based on the information shown in the table to the right, answer the following questions, a through e.

Assume today is April 29, 2021, before the market has opened.

ABCD
Option Type	Stock Price	IV	Strike Price	Exp	Vol	Open Int
	25.28	41.52%	24.00	May, 2021	4,892	55,057
	Annual interest rate	3.30%			Trading days per year	252

a) Calculate the call option value using the Balck-Scholes equations.

b) Calculate the put option value using the Black-Scholes equations.

c) Using the Black -Scholes equations, calculate the Greeks for the call option.

d) Using the Black -Scholes equations, calculate the Greeks for the put option.

Question 4:

Assume today is November 29, 2021. One year ago, on December 11, 2020, you created a minimum variance portfolio based from the five stocks shown to the right.

The minimum variance weights for the five stock portfolio are:

		Weight
The minimum variance weights for the five stock portfolio are:	Stock A	-0.032287675
	Stock B	-0.018391368
	Stock C	1.013997957
	Stock D	0.010587176
	Stock E	0.026093909

The total value of the portfolio when you satrted on December 11, 2020, was $1,000,000.00

a) Determine the portfolio value for each of the trading days this past year; fill in the yellow cells in the table provided to the right.

b) Using all 252 trading days worth of stock data that you have accumulated since the beginning of your investment, calculate the 95% VaR and the 99% VaR using the Historical Method.

Question 5:

We will use the same data as in Question 4, which is shown to the right.

The minimum variance weights for the five stock portfolio are:

The minimum variance weights for the five stock portfolio are:		Weight
	Stock A	-0.032287675
	Stock B	-0.018391368
	Stock C	1.013997957
	Stock D	0.010587176
	Stock E	0.026093909

The total value of the portfolio when you satrted on December 11, 2020, was $1,000,000.00

a) Based on the covariance matrix provided, and using the values you invested in each of the stocks in your portfolio from Question 7, determine the Variance Standard Deviation and Average Return for your portfolio for today,
November 29, 2021, the last day.

b) Using the Variance-Covariance Method, calculate the 95% VaR and 99% VaR.

Attachment:- stock MCCA.rar

Reference no: EM133037112

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