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.
Q. Disadvantage or redundancy of excessive working capital? Excessive working capital means idle funds which earns no profit for the business operation it should have nighters
Which method should we use to valuate young companies with high growth but uncertain futures? Two examples were Boston Chicken and Telepizza when they began. The great majo
Lakespring Retirement Village is home to senior citizens who are fairly independent but need assistance with basic health care and occasional meals. Jill Thompson, a licensed beaut
Price an Asian call option with on a stock with the initial stock price $50 and volatility 30$. The strike price of the option is $52. The time to maturity of the option is 3 month
Saven Travel Corporation is considering several investment opportunities in order to diversify its operations. Mr. Saven, president, is trying to determine the firm''''s cost of ca
X company sells on terms of 2/10, net 40. Gross sales last year were $4.5 million and accounts receivable averaged $ 437,500. Half of X''s customers paid on day 10 and took discoun
Aims of FSA The aim of FSA is to promote efficient, orderly and fair markets, and to help retail consumers to get a fair deal. In fact, FSA has set out its aims under three bro
What are the Reasons why organisations grow Required to provide higher financial returns to investors e.g. increases the wealth of shareholders Possible to achieve econ
causes for financial innovation
How would you incorporate political risk into the capital budgeting process of foreign investment projects? One method is to adjust the cost of capital upward to imitate politi
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