Analyze the dual trade to the third butterfly trade in Table 5.8. Thus go long a put
Question:
Analyze the dual trade to the third butterfly trade in Table 5.8. Thus go long a put at 80, short 2 puts at 75, and long a put at 70. Let the starting price be S0 = 70 and assume the drift is −2 %.
Data given in Table 5.8
Transcribed Image Text:
Table 5.8 T = 21, r= 0.03 Trade: Stock Price Max Drift Total Gain Ex- calls at price (net loss (%) loss prob pected 80:85:90:95 So debt) prob (%) 1:2:1: 1:2:1: 1:2:1: Gain expectation for butterflies 1:2::1 1:2:1 1:2:1 1:3::2 1:3::2 1:3::2 80 (1.19) 85 (2.18) 90 (1.21) 80 85 (1.94) 90 0.28 (1.18) 6.18 4 6.94 2 4.72 -4 1.19 4 50 2.18 2 22 1.21 -4 48 80 (0.97) 85 (0.25) 90 5.34 0+ 1 12 15.97 4 0+ 15.25 2 1 9.66 -4 12 37 51 40 37 55 55 37 60 55 Gain rate. gain (%) 0.019 28 0.003 2 0.097 140 0.016 0.010 0.228 0.013 0.034 0.511 5 3 84 1 4 92
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 100% (5 reviews)
The dual trade to the third butterfly trade in Table 58 is a long put at 80 short 2 puts at 75 and a long put at 70 This trade has a net debit of 119 a maximum loss of 2 and a drift of 2 To analyze th...View the full answer
Answered By
Ishrat Khan
Previously, I have worked as an accounting scholar at acemyhomework, and have been tutoring busines students in various subjects, mostly accounting. More specifically I'm very knowledgeable in accounting subjects for college and university level. I have done master in commerce specialising in accounting and finance as well as other business subjects.
5.00+
138+ Reviews
432+ Question Solved
Related Book For
Question Posted:
Students also viewed these Business questions
-
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...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
9. What will the following code print on the console? int main() { } int num = 4; cout < < (num & 3 == 0 ? "first" : "second"); return 0; a. second b. first c. There is a syntax error d. It will...
-
Southerns Pizza bought a used Nissan delivery van on January 2, 2010, for $19,200. The van was expected to remain in service four years (30,000 miles). At the end of its useful life, Southerns...
-
For one-dimensional conduction, why are the boundary control volumes half the size of interior control volumes? GIVEN One-dimensional conduction EXPLAIN (a) Why the boundary control volume is half...
-
The ledger balances of Tick Tick Ltd at 31 March 2011 were as follows: A capital reduction scheme has been sanctioned under which the 250,000 preference shares are to be reduced to 80p each, fully...
-
Martinez Manufacturing Corporation accumulates the following data relative to jobs started and finished during the month of June 2012. Overhead is applied on the basis of standard machine hours....
-
KEY DATA FOR OPTION 1 - ONLINE: Investment required (remember to depreciate existing long-term assets at the 2008 amount and ignore the half year rule for 2009 new depreciation - i.e. apply a full...
-
Show that if X P o ( 1 ) and Y P o ( 2 ), then X + Y P o ( 1 + 2 ). Pr(X + Y z) = Pr(X z-yY= y)Pr(Y = y) y=0 11 y=0 d e-site-re -1 (z - y)! y!
-
Using the parameters in the header of Table 5.5, investigate the effect on the gain rate of the 80/85 spread if the volatility: becomes 30 % just after the trade is established, becomes 10 % under...
-
Explain the market-based forecast as a technique for forecasting exchange rates.
-
Please I need help with this discussion board Assignment: Coordination of Care- Delegation Utilizing the exemplar delegation, read Giddens and all articles provided with the addition of the article...
-
Viacom Inc B issues a 11 percent coupon bond with 24 years maturity and $1,000 face (par) value. If the yield to maturity of this bond is 14 percent, find the bond's price.
-
If you buy a CD with $ 2 , 9 1 2 today, offering a guaranteed 3 . 4 % APR, compounded monthly, how much money will you have in 6 years?
-
Why is responsibility retained by nurses when tasks are delegated? Examine the relationships among delegation, authority, responsibility, and accountability. What are some legal aspects of...
-
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $360,000 and has a 12-year life and no salvage value. The...
-
Aarons, Inc., and Rent-A-Center, Inc., are two publicly traded rental companies. They reported the following in their financial statements (in millions of dollars, except per-share amounts and stock...
-
Kims Konstructions has assembled the following data for a proposed straw-reinforced brick maker (SRBM): SRBM Cost: $26,000 Life: 5 years Revenue (p.a.) $11,000 Operating Expenses (p.a.) $3,000...
-
A particle starts from rest and accelerates as shown in Figure P2.12. Determine (a) The particles speed at t = 10.0 s and at t = 20.0 s, and (b) The distance traveled in the first 20.0 s.
-
Secretariat won the Kentucky Derby with times for successive quarter-mile segments of 25.2 s, 24.0 s, 23.8, and 23.0 s. (a) Find his average speed during each quarter-mile segment. (b) Assuming that...
-
A velocitytime graph for an object moving along the x axis is shown in Figure P2.14. ] (a) Plot a graph of the acceleration versus time. (b) Determine the average acceleration of the object in the...
-
What types of information can be found in a mutual fund prospectus? Multiple select question. information about dividends and distributions information about current net asset value information about...
-
Instructions Using the information from previous chapters and the new information above, do the following: a. Answer Natalie's questions. b. Prepare and post to T accounts the June 2024 transactions....
-
Concerning factoring, all of the following are true except: Group of answer choices factors prefer business over consumer accounts factoring is done at a discount to the third party purchaser...
Study smarter with the SolutionInn App