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.
Zero base budgets: this is a new technique, which was first used by the US Department of Agriculture in 1961. Texas instruments, an MNC, have used it in the private sector. But,
Considering the following information, what is the price of the share as per Gordon’s Model? Details of the Company Net sales Rs.120 lakhs Net profit margin 12.5% Outstandin
WAYS AND MEANS ADVANCES (WMAs) WMA is not a permanent source of financing government deficit. But, this is likely to provide greater autonomy to the RBI in conducting monetary
Which parameter better calculates value creation; the EVA (Economic Value Added), the economic profit or the CVA (Cash Value Added)? The EVA (Economic Value Added) is the profi
Explain the statement: “Exposure is the regression coefficient”. Answer: Exposure to currency risk can be suitably calculated by the sensitivity of the firm’s future cash flows a
Discuss the advantages and disadvantages of the gold standard. Answer: The benefits of the gold standard include: (I) as the supply of gold is restricted, countries cannot compr
Assignment II Describe capital budgeting techniques with formulas and examples.
Portfolio Management: Project Portfolio Management (PPM) is the centralized management of processes, technologies and methods used by project management offices (PMOs) and pro
Are there any legal factors that could restrict a corporation in its attempt to pay cash dividends to common stockholders? Explain. A firm may be lawfully restricted as to the
i want some presentation slides of this chapter from page 570 to 580
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