Compute the 95% 10-day VaR for a written strangle (sell an out-of-the-money call and an out-of-the-money put) on 100,000 shares of stock A. Assume the options have strikes of $90 and $110 and have 1 year to expiration. Use the delta-approximation method and Monte Carlo simulation. What accounts for the difference in your answers?
Answer to relevant QuestionsPick a derivatives exchange such as CME Group, Eurex, or the Chicago Board Options Exchange. Go to that exchange's website and try to determine the following: a. What products the exchange trades. b. The trading volume in ...Suppose a stock pays a quarterly dividend of $3. You plan to hold a short position in the stock across the dividend ex-date. What is your obligation on that date? If you are a taxable investor, what would you guess is the ...Using Monte Carlo, compute the 95% and 99% 1-, 10-, and 20-day tail VaRs for the position in Problem 26.2. Using Monte Carlo simulation, reproduce Tables 27.10 and 27.11. Produce a similar table assuming a default correlation of 25%. Suppose that there is a 3%per year chance that the firm’s asset value can jump to zero. Assume that the firm issues 5-year zero-coupon debt with a promised payment of $110. Using the Merton jump model, compute the debt ...
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