Implied Volatility. Replicate the Implied Volatility Smile Figure on Page 12 of LN3, using current Call...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Implied Volatility. Replicate the Implied Volatility Smile Figure on Page 12 of LN3, using current Call options data on the S&P500 (SPX) maturing on January 20, 2023. Please state the assumptions you make, if any, to compute the time to maturity of the options, that is the value of T that you use in your formulas. Current Options Data can be found at the following link: https://www.cboe.com/delayed_quotes/spx/quote_table To calculate option prices use the average of the bid and ask prices to avoid liquidity issues. Choose Size = 10 and Expiration = January 2023. The table will display several maturi- ties but you'll only need to choose 10 SPX options maturing on January 20, 2023. Note that the current S&P500 index value is on the top right corner of the table where it says "Last:***** *** You can use the federal reserve website (link below) to retrieve the value of the risk free rate. Use the Treasury Constant Maturity (TCM) rate that most closely matches the maturity of the options. Note that TCM are compounded annually, so be sure to make the relevant adjustments. Please report the value of the rate that you use. http://www.federalreserve.gov/releases/h15/Current/ • The dividend yield can be estimated using the following link: https://ycharts.com/indicators/sp_500_dividend_yield You can estimate the dividend yield as the average dividend yield over the last available 12 months. Note that even though S&P500 prices (P) are reported monthly, dividends (D) are annualized, so gives the effective annual dividend yield. Be sure to make the relevant compounding adjustments and report the dividend yield that you use. Implied Volatility. Replicate the Implied Volatility Smile Figure on Page 12 of LN3, using current Call options data on the S&P500 (SPX) maturing on January 20, 2023. Please state the assumptions you make, if any, to compute the time to maturity of the options, that is the value of T that you use in your formulas. Current Options Data can be found at the following link: https://www.cboe.com/delayed_quotes/spx/quote_table To calculate option prices use the average of the bid and ask prices to avoid liquidity issues. Choose Size = 10 and Expiration = January 2023. The table will display several maturi- ties but you'll only need to choose 10 SPX options maturing on January 20, 2023. Note that the current S&P500 index value is on the top right corner of the table where it says "Last:***** *** You can use the federal reserve website (link below) to retrieve the value of the risk free rate. Use the Treasury Constant Maturity (TCM) rate that most closely matches the maturity of the options. Note that TCM are compounded annually, so be sure to make the relevant adjustments. Please report the value of the rate that you use. http://www.federalreserve.gov/releases/h15/Current/ • The dividend yield can be estimated using the following link: https://ycharts.com/indicators/sp_500_dividend_yield You can estimate the dividend yield as the average dividend yield over the last available 12 months. Note that even though S&P500 prices (P) are reported monthly, dividends (D) are annualized, so gives the effective annual dividend yield. Be sure to make the relevant compounding adjustments and report the dividend yield that you use.
Expert Answer:
Answer rating: 100% (QA)
Using the call option data now available for the SP500 SPX maturing on January 20 2023 we may duplicate the implied volatility smile figure on page 12 of LN3 by performing the following steps 1 Select ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these finance questions
-
Case Study: Quick Fix Dental Practice Technology requirements Application must be built using Visual Studio 2019 or Visual Studio 2017, professional or enterprise. The community edition is not...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Each of the systems in Problems 11 through 18 has a single critical point (x 0 , y 0 ). Apply Theorem 2 to classify this critical point as to type and stability. Verify your conclusion by using a...
-
Locate the 2007 financial statements for The Walt Disney Company on the Internet and consider the following questions: 1. What depreciation method does Disney use for its parks, resorts, and other...
-
On June 1, 20X1, Zenna Brown opened the Leadership Coaching Agency. She plans to use the chart of accounts given below. INSTRUCTIONS 1. Journalize the transactions. Be sure to number the journal...
-
Given the basis sets of groups Set- \(1\left\{\mathrm{CH}_{3} ; \mathrm{CH}_{2} ; \mathrm{CH} ; \mathrm{C} ight\} ;\) Set- \(2\left\{\mathrm{OH} ; \mathrm{CH}_{3} \mathrm{CO} ; \mathrm{CH}_{3}...
-
1. Describe the recovery strategies that were offered by the company to offset the customers complaint. Classify the recovery strategies based on the recovery strategy categories provided in this...
-
conversion costs are incurred evenly throughout the process. The beginning inventory consists of $51,750 of direct materials. ACCOUNT Work in Process-Forging Department ACCOUNT NO. Balance Date Item...
-
The financial statements of Merdana Trading Ltd. are given below: 2014 2013 2014 2013 Cash and Cash Equivalents 12,250 10,470 Total Assets 128,980 113,110 Receivables 9,065 8,055 Inventory 6,620...
-
October 31 is the fiscal (financial) year-end for the Spring Hill Ski Complex. From the information below, prepare the adjusting entries with suitable explanations (including any necessary...
-
Salazar and child, Tahmores, are cash basis taxpayers. Salazar gave Tahmores a corporate bond with a face amount and fair market value of $10,000. On the date of the gift, September 30, 2023, the...
-
During the early 19th century, the Springfield (Massachu-setts) Armory provided a good example of: an increasing division of labor accounting techniques for wage payments and control of time and...
-
Bank extends a revolving line of credit to Epstein Corp., secured by Epstein's inventory and receivables. Epstein has now filed bankruptcy. At all times during the 90 days preceding the filing the...
-
rephrase. PT IS WIDOWED AND ORIGINALLY FROM GERMANY. PT SPOUSE DIED 4 YEARS AGO AND PCG REPORTED SHE HAS STUGGLED WITH ANXIETY AND DEPRESSION EVER SINCE. PT HAS 2 ADULT CHILDRE THAT ARE VERY INVOLVED...
-
rephrase.PCG REPORTED THAT THE FACILITY HAS REQUESTED THE FAMILY NOT VISIT FOR TWO WEEKS TO ALLOW PT TO ADJUT TO THE NEW FACILITY. PCG HARED HER CONCERNS ABUT NOT BEING ABLE TO VISIT PT AND PT...
-
In 2005, there were 549 children adopted into Country A from Country B, and this number was increasing by 515 children per year. (a) Determine a point-slope equation of a line that approximates the...
-
Show that if A is any m n matrix, then Im A = A and AIn = A.
-
Bill and Guilda each own 50 percent of the stock of Radiata Corporation, an S corporation. Guilda's basis in her stock is $25,000. On July 31, 2012, Bill sells his stock, with a basis of $40,000, to...
-
In 2012, Lou has a salary of $54,000 from her job. She also has interest income of $1,700. Lou is single and has no dependents. During the year, Lou sold silver coins held as an investment for a...
-
Charlie's Green Lawn Care is a cash basis taxpayer. Charlie Adame, the sole proprietor, is considering delaying some of his December 2012 customer billings for lawn care into the next year. In...
-
In 2018, Bert Richards transferred a \(\$ 100,000\) savings account to his wife in trust. The terms of the trust are that income is to be distributed annually to his wife, Mary Beth, the remainder to...
-
In 2018, Mr. Colburn created a trust for the benefit of his five adult children and transferred \(\$ 300,000\) to it. The trustee may decide how much income to pay to each child each year. The trust...
-
In problem 49, when does the estate's taxable year end? problem 49, John Henry died on May 1, 2018. When does his final 1040 have to be filed?
Study smarter with the SolutionInn App