Make table that shows the stock positions

Assignment Help Finance Basics
Reference no: EM132675709

Assume currently the price of a stock is $20 and a bank sold 100,000 call options on this stock with a strike price of $15. The bank wants to use delta hedging to protect itself.

The price changes and the corresponding deltas of the option are as follows over the first three weeks. (The bank rebalances every week). The risk free rate is 3%.

Time Price Delta

0 20 0.70

1 21 0.74

2 18 0.60

3 16 0.49

Make table that shows the stock positions necessary to delta hedge every week and the weekly and cumulative costs of delta hedging.

Reference no: EM132675709

Questions Cloud

What public accounting firm performed the audit : Is it possible to determine which firm/individual prepared the form 990? If so, who? Is it the same organization for both documents
What is the sensitivity of ocf to changes : In percentage terms, what is the sensitivity of OCF to changes in the variable cost per unit projection?
What is the npv of test-marketing before going to market : What is the NPV of test-marketing before going to market? (Round answer to 2 decimal places. Do not round intermediate calculations)
How could the midwest managers apply : Explain the difference in profitability between Order 1 and Order 2; Order 3 and Order 4. How could the Midwest managers apply analysis to increase profits
Make table that shows the stock positions : Make table that shows the stock positions necessary to delta hedge every week and the weekly and cumulative costs of delta hedging.
Prepare the journal entries that would appear in accounting : Prepare the journal entries that would appear in the accounting records of Lurline Ltd to account for the issue of the share appreciation rights
What is the var for one of the investments : Suppose that you have two investments, each of which has a 0.9% chance of a loss of $10 million and a 99.1% chance of a loss of $1 million.
Calculate the net cash flow from financing : Proceeds from sales of plant and equipment 1,986. Calculate the net cash flow from (a) financing and (b) investing activities for Wheatgerm
Discuss the major goals of the family : Please discuss the major goals of the family and how would they go about achieving each goal. Please be specific to how they would achieve each goal

Reviews

Write a Review

Finance Basics Questions & Answers

  Should caroline candles buy the equipment at this time

The candle-making equipment is expected to increase the cash flows by $27,000 in the first year, $48,000 in the second year, and $69,000 a year for the following two years. Should Caroline's Candles buy the equipment at this time? Why or why not?

  What is the npv of the purchase

If we require a 15% return, what is the NPV of the purchase? Assume a tax rate of 40%

  Problem related to the business strategy analysis

Conduct an analysis of a Fortune 500 company and prepare a report that includes the following:

  Determining the corporate tax rate

If the corporate tax rate is 34%, what would it's cost of equity be if the firm was all equity financed? (Answer in decimal form and round answer to 4 decimal places, round intermediate calculations to 5 decimal places).

  What is the correct price for the coupon bond

The Federal Government 2 - year coupon bond has a face value of $1,000 and pays annual coupons of $33. The next coupon is due in one year.

  What is the future value of the given annuity

What is the future value of this annuity if the payments are invested in an account paying 10.0 percent interest annually?

  How can you measure the doctor''s performance in the surgery

During one surgery the doctor was called away for an emergency that lasted an hour and patients who had appointments during this time were told to come back later. How can you measure the doctor's performance in the surgery?

  Calculation of multiple cash flows for a year

Calculation of multiple cash flows for a year and the amount of the annuity shown below is the amount of each individual cash flow

  Define typical causes of failures in corporate governance

Emerging Markets Corporate Governance ­Failures. It has been claimed that failures in corporate governance have hampered the growth and profitability.

  Accumulated some money for retirement

You have accumulated some money for retirement. You are going to to withdraw $64,628 every year at the beginning of the year for the next 26 years

  What is the purpose of bond ratings

What is the purpose of bond ratings? And how can investors use them in making their investment decisions?

  Compute the flotation cost

Eagle Sports Products (ESP) is considering issuing debt to raise funds to finance its growth during the next few years. The amount of the issue will be between $35 million and $40 million.

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