Supposing the effective quarterly interest rate is 1.5%, what are the per-barrel swap prices for 4-quarter and 8-quarter oil swaps? (Use oil forward prices in Table 8.9.) What is the total cost of prepaid 4- and 8-quarter swaps?
Answer to relevant QuestionsUsing the information in Table 8.9, what are the euro-denominated fixed rates for 4- and 8-quarter swaps? Suppose call and put prices are given by Find the convexity violations. What spread would you use to effect arbitrage? Demonstrate that the spread position is an arbitrage. Consider the June 165, 170, and 175 call option prices in Table 9.1. a. Does convexity hold if you buy a butterfly spread, buying at the ask price and selling at the bid? b. Does convexity hold if you sell a butterfly ...Suppose call and put prices are given by What no-arbitrage property is violated? What spread positionwould you use to effect arbitrage? Demonstrate that the spread position is an arbitrage. Use the same inputs as in the previous problem, except that K = $1.00. a. What is the price of a 9-month European put? b. What is the price of a 9-month American put?
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