Suppose you buy a 40-45 bull spread with 91 days to expiration. If you delta-hedge this position, what investment is required? What is your overnight profit if the stock tomorrow is $39? What if the stock is $40.50?
Answer to relevant QuestionsSuppose you enter into a put ratio spread where you buy a 45-strike put and sell two 40 strike puts. If you delta-hedge this position, what investment is required? What is your overnight profit if the stock tomorrow is $39? ...Consider a 40-strike call with 91 days to expiration. Graph the results from the following calculations. a. Compute the actual price with 90 days to expiration at $1 intervals from $30 to $50. b. Compute the estimated price ...Let S = $40, σ = 0.30, r = 0.08, T = 1, and δ = 0. Also let Q = $60, σQ = 0.50, δQ = 0.04, and ρ = 0.5. What is the price of a standard 40-strike call with S as the underlying asset? What is the price of an exchange ...Suppose that S = $100, K = $100, r = 0.08, σ = 0.30, δ = 0, and T = 1. Construct a standard two-period binomial stock price tree using the method in Chapter 10. a. Consider stock price averages computed by averaging the ...Compute λ if the dividend on the CD is 0, the initial price is $1300, and the payoff is $1200 + λ × max(0, S5.5 − 1300).
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