Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Q. Long and short dated volatility?
1. If an investor purchase long-dated volatility as well as sells short-dated volatility then the investor is expecting a decrease in the short dated volatility and an increase in the long dated volatility.
Obviously there is no guarantee that these expectations will be realized. If short run volatility goes up or else and long run volatility decreases the pay off from the position would definitely be negative.
This is equal to an investor constructing a short straddle position by using knock-out options. Long straddle may be constructed by utilizing options which have break-out clause to put a limit to unrestricted risk of loss that arises from the short (straddle) position in the short run.
If short dated volatility turns out to be high an additional premium is able to be triggered on the options which are used for the long straddle.
This added payoff from the long volatility position off sets the losses from the short volatility position.
3. The applicable payoff function will shift upwards by the amount of the additional payoff.
4. If the added premium is a fixed amount this may cut potential losses yet it mayn't be sufficient enough. Nevertheless considering that the short position is taken for one month this risk mayn't be a very big risk.
5. It is understandable from the text that volatility positions taken by using the straddles are not pure volatility positions.
Present V alue This is the current value of a future payment or stream of payments. The present value is calculated by applying a discount (capitalization) rate to the
CLASSIFICATION OF BUDGETS Budgets can be categorized on the basis of several bases. There are three important bases for classifying budgets. They are - functions, time, and
Q. Show Financial Management Process? The financial management process begins with the financial planning and decisions. While implementing these decisions, the firm has to acq
Question: The stock of Bax Limited performs relatively well to other stocks during recessionary periods. The stock of Pax Limited, on the other hand, does well during growth
QUASI-INSTRUMENTS These instruments are considered as debt instruments for a time-frame and are converted into equity at the option of the investor (or at company's option) aft
BURLEY PLC Financial desirability In a real-terms analysis the real rate of return necessary by shareholders has to be used. This is found as follows 1 nominal rate/1 i
Q. What is Accelerated Depreciation? Accelerated Depreciation - Method which records greater DEPRECIATION than STRAIGHT-LINE DEPRECIATION in the early years and less depreciati
You have just purchased a stock that would pay the dividends of the first four years as D1 = $0.65, D2 = $0.74, D3 = $0.79, D4 = $0.84. You were also told that the dividends would
a) On 1 st January 2010, Grimm issued 400,000 convertible £1 6% debentures for £600,000. The professional fees associated with the issue were £40,000 and the fair value of simil
aggressive policy
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd