Suppose S = $100, K = $95, σ = 30%, r = 0.08, δ = 0.03, and T = 0.75. Using the technique in the previous problem, compute the Greek measure corresponding to a change in the dividend yield. What is the predicted effect of a change of 1 percentage point in the dividend yield?
Answer to relevant QuestionsConsider a bull spread where you buy a 40-strike call and sell a 45-strike call. Suppose S = $40, σ = 0.30, r = 0.08, δ = 0, and T = 0.5. Draw a graph with stock prices ranging from $20 to $60 depicting the profit on the ...Consider a perpetual call option with S = $50, K = $60, r = 0.06, σ = 0.40, and δ = 0.03. a. What is the price of the option and at what stock price should it be exercised? b. Suppose δ = 0.04 with all other inputs the ...The exchange rate is ¥95/=C, the yen-denominated interest rate is 1.5%, the eurodenominated interest rate is 3.5%, and the exchange rate volatility is 10%. a. What is the price of a 90-strike yen-denominated euro put with 6 ...Repeat Problem 13.10 for a 365-day 40-strike put. Repeat the previous problem, except that instead of hedging volatility risk, you wish to hedge interest rate risk, i.e., to rho-hedge. In addition to delta-, gamma-, and rhohedging, can you delta-gamma-rho-vega hedge? In ...
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