All Matches

Solution Library

Expert Answer

Textbooks

Search Textbook questions, tutors and Books

Oops, something went wrong!

Change your search query and then try again

Result Not Found

Books FREE
Tutors
Study Help
Ask a Question

Search
Sign In
Register

study help
business
banking

Questions and Answers of Banking

This problem builds on the previous problem using the same parameters, only valuing a call option instead of a bond. Using Monte Carlo, simulate the Vasicek process for 3 years. For each simulation
a. What is the 2-year forward price for a 1-year bond?b. What is the price of a call option that expires in 2 years, giving you the right to pay $0.90 to buy a bond expiring in 1 year?c. What is the
Using Monte Carlo, simulate the process dr = a(b − r)dt + σ √rdZ, assuming that r = 6%, a = 0.2, b = 0.08, φ = 0 and σ = 0.02. Compute the prices of 1-, 2-, and 3-year zero coupon bonds, and
What is the price of a 3-year interest rate cap with an 11.5% (effective annual) cap rate?Use the following information:
Suppose the yield curve is flat at 8%. Consider 3- and 6-year zero-coupon bonds. You buy one 3-year bond and sell an appropriate quantity of the 6-year bond to duration hedge the position. Any
Suppose the yield curve is flat at 6%. Consider a 4-year 5%-coupon bond and an 8-year 7%-coupon bond. All coupons are annual.a. What are the prices and durations of both bonds?b. Consider buying one
Consider two zero-coupon bonds with 2 years and 10 years to maturity. Let a =0.2, b = 0.1, r = 0.05, σVasicek = 10%, and σCIR = 44.721%. The interest rate risk premium is zero in each case. We will
Construct a four-period, three-step (eight terminal node) binomial interest rate tree where the initial interest rate is 10% and rates can move up or down by 2%; model your tree after that in Figure
Verify that the 4-year zero-coupon bond price generated by the tree in Figure 25.5 is $0.6243.In Figure 25.5
Verify that the 1-year yield volatility of the 4-year zero-coupon bond price generated by the tree in Figure 25.5 is 0.14.In Figure 25.5
Consider the expression in equation (26.6). What is the exact probability that, over a 1-day horizon, stock A will have a loss?
Compute the 95% 10-day tail VaR for the position in Problem 26.8.
Suppose you write a 1-year cash-or-nothing put with a strike of $50 and a 1-year cash-or-nothing call with a strike of $215, both on stock A. a. What is the 1-year 99% VaR for each option
Suppose the 7-year zero-coupon bond has a yield of 6% and yield volatility of 10% and the 10-year zero-coupon bond has a yield of 6.5% and yield volatility of 9.5%. The correlation between the 7-year
Using the same assumptions as in Problem 26.12, compute the 10-day 95% VaR for a claim that pays $3m each year in years 7–10.
Assuming a $10m investment in one stock, compute the 95% and 99% VaR for stocks A and B over 1-day, 10-day, and 20-day horizons. Discuss.
Assuming a $10m investment that is 40% stock A and 60% stock B, compute the 95% and 99% VaR for the position over 1-day, 10-day, and 20-day horizons. Discuss.
What are 95% and 99% 1-, 10-, and 20-dayVaRs for a portfolio that has $4m invested in stock A, $3.5m in stock B, and $2.5m in stock C? Discuss.
Using the same assumptions as in Example 26.3, compute VaR with and without the mean, assuming correlations of −1, −0.5, 0, 0.5, and 1. Is risk eliminated with a correlation of −1? If not, why
Using the delta-approximation method and assuming a $10m investment in stock A, compute the 95% and 99% 1-, 10-, and 20-day VaRs for a position consisting of stock A plus one 105-strike put option
Repeat the previous problem, only use Monte Carlo simulation. In previous problem Using the delta-approximation method and assuming a $10m investment in stock A, compute the 95% and 99% 1-, 10-, and
Compute the 95% 10-day VaR for a written strangle (sell an out-of-the-money call and an out-of-the-money put) on 100,000 shares of stock A. Assume the options have strikes of $90 and $110 and have 1
Using Monte Carlo, compute the 95% and 99% 1-, 10-, and 20-day tail VaRs for the position in Problem 26.2. Discuss.
The firm has a single outstanding debt issue with a promised maturity payment of $120 in 5 years. What is the probability of bankruptcy? What is the credit spread? Assume that a firm has assets of
Consider two firms, one with an FF rating and one with an FFF rating. What is the probability that after 4 years each will have retained its rating? What is the probability that each will have moved
Suppose that in Figure 27.6 the tranches have promised payments of $160 (senior), $50 (mezzanine), and $90 (subordinated). Reproduce the table for this case, assuming zero default correlation.In
Repeat the previous problem, only assuming that defaults are perfectly correlated.In previous problem Suppose that in Figure 27.6 the tranches have promised payments of $160 (senior), $50
Using Monte Carlo simulation, reproduce Tables 27.10 and 27.11. Produce a similar table assuming a default correlation of 25%. Discuss.
Following Table 27.10, compute the prices of first, second, and Nth-to-default bonds assuming that defaults are uncorrelated and that there are 5, 10, 20, and 50 bonds in the portfolio. How are the
Repeat the previous problem, assuming that default correlations are 0.25.In the previous problem Following Table 27.10, compute the prices of first, second, and Nth-to-default bonds assuming that
Suppose the firm issues a single zero-coupon bond with maturity value $100.a. Compute the yield, probability of default, and expected loss given default for times to maturity of 1, 2, 3, 4, 5, 10,
Suppose the firm issues a single zero-coupon bond with time to maturity 3 years and maturity value $110.a. Compute the price, yield to maturity, default probability, and expected recovery (E[BT
Suppose the firm issues a single zero-coupon bond. a. Suppose the maturity value of the bond is $80. Compute the yield and default probability for times to maturity of 1, 2, 3, 4, 5, 10, and 20
Repeat the previous problem, only compute the expected recovery value instead of the default probability. How does the expected recovery value change as time to maturity changes? In previous
Suppose that there is a 3%per year chance that the firm’s asset value can jump to zero. Assume that the firm issues 5-year zero-coupon debt with a promised payment of $110. Using the Merton jump
Suppose the firm has a single outstanding debt issue with a promised maturity payment of $120 in 5 years. Assume that bankruptcy is triggered by assets (which are observable) falling below $40 in
Repeat the previous problem, except that the time to maturity can be 1, 2, 3, 4, 5, 10, or 20 years. How does the bond yield change with time to maturity?In previous problem suppose the firm has a
Consider a firm with an F rating.a. What is the probability that after 4 years it will still have an F rating?b. What is the probability that after 4 years it will have an FF or FFF rating?c. From
What investment opportunities might MNCs enjoy that are not available to local firms?
How can MNCs reduce operating expenses relative to domestic firms?
What are the perfect financial market assumptions? What is their implication for multinational financial management?
List one or more trade pacts in which your country is involved. Do these trade pacts affect all residents of your country in the same way? On balance, are these trade pacts good or bad for residents
What were the causes and consequences of the global financial crisis of 2008?
Do countries tend to export more or less of their gross national product today than in years past? What are the reasons for this trend?
How globalization has in the world's goods markets affected world trade? How has globalization in the world's financial markets affected world trade?
How would an economist categorize exchange rate systems? How would the IMF make this classification? In what ways are these same? How are they different?
Describe the Bretton Woods agreement. How long did the agreement last? What forced its collapse?
What factors contributed to the Mexican peso crisis of 1995 and to the Asian crises of 1997?
What is moral hazard and how does it relate to IMF rescue packages?
What is Rule #2 when dealing with foreign exchange? Why is it important?
What are the functions of the foreign exchange market?
Define operational, informational, and allocational efficiency.
What is a forward premium? What is a forward discount?
Describe the empirical behavior of exchange rates.
What is the difference between a money market and a capital market?
What is the difference between an internal and an external market?
What are the Basel Accords? What effects have they had on international banks?
What is Rule #1 when dealing with foreign exchange? Why is it important?
Credit Suisse First Boston (CSFB) quotes the following rates. For each quote, state which currency CSFB is buying and which currency CSFB is selling at the quoted rates. a. €0.8894/$ Bid and
Convert to American terms. Keep the currency being bought and sold in the denominator. a. €0.8894/$ Bid and €0.8898/$ Ask b. €0.8898/$ Bid and €0.8894/$ Ask
Credit Suisse First Boston (CSFB) quotes the following rates for the U.S. dollar.a. Is the dollar selling at a forward premium or a forward discount? Calculate percentage premiums or discounts for
In what way is the quote "$1.1453/€ Bid and $1.1459/€ Ask" equivalent to "$1.1459/€ Bid and $1.1453/€ Ask"?
Suppose the spot rate is $1.08/€. The dollar then appreciates by 25 percent against the euro. What is the new exchange rate in dollars per euro?
The Czech koruna (CZK) spot rate is CZK36.02/$. a. A 20 percent depreciation of the koruna will result in what new CZK/$ spot rate? b. If the koruna depreciates by 20 percent, by how much does the
Suppose you estimate a GARCH model (with p = q = 1) of monthly volatility in the value of the dollar and arrive at the following estimates: t2 = 0.0052 + (0.30)t-12 + (0.40)st-12, where the
What is the law of one price? Discuss.
What is the effect of a real appreciation of the domestic currency on the purchasing power of domestic residents?
Will an appreciation of the domestic currency help or hurt a domestic exporter?
What methods can be used to forecast future spot rates of exchange?
How can the international parity conditions allow you to forecast next year's spot rate?
What is an arbitrage profit?
What is the difference between locational, triangular, and covered interest arbitrage?
Is interest rate parity a reliable relation in the interbank markets?
What is relative purchasing power parity?
Are forward exchange rates good predictors of future spot rates?
Calculate the following cross exchange rates.a. If exchange rates are 1.2 dollars per euro and 1.5 dollars per pound, what is the euro per pound exchange rate?b. If the euro trades at ¥125/€ and
Expected inflation over the next year is E[p] = 10%. What nominal interest rate i should investors charge on the following assets? a. Investors require a real rate of return of ʀ = 2 percent on a
Suppose the spot rate ends the year exactly where it began at S0¥/$ = S1¥/$ = ¥100/$. Inflation in Japan was 2% during the year. Inflation in the U.S. was 3%. Calculate the percentage change in
Suppose the Japanese yen appreciates against the Indian rupee from R0.30/¥ to R0.33/¥ during a year. Inflation during the year is 5% in the India and 3% in Japan. What is the real depreciation or
How large would transactions costs have to be as a percentage of the principal to make triangular arbitrage between the exchange rates S$/€ = $0.9000/€, S$/¥ = $0.009000/¥, and S¥/€ =
Given S0$/£ = $1.5000/£ and the one-year forward rate F1$/£ = $1.3500/£, what is the dollar forward premium or discount (a) in basis points and (b) as a percentage of the spot rate? Based on the
The euro is quoted at "€0.008300/¥ Bid and €0.008200/¥ Ask" in Tokyo. The yen is quoted at "¥121.20/€ Bid and ¥121.10/€ Ask" in Paris. Convert the Tokyo quote into a ¥/€ quote and then
The real rate of interest on three-month government securities is 3 percent in both Switzerland and the United States. Inflation is 2 percent in Switzerland and 4 percent in the United States. In
The current spot exchange rate is S0$/€ = $1.10/€ and the one-year forward rate is F1$/€ = $1.11/€. The prime rate in the United States is 5 percent. a. What is the prime rate in euros if
Price indices in the United States and the United Kingdom are currently P0$ = $2000 and P0£ = £10, respectively. The spot rate of exchange is S0£/$ = £0.80/$. Inflation rates are expected to be
A foreign exchange dealer provides the following quotes for the dollar against the Brazilian real.a. Six-month Eurodollars yield 5 percent per year with semiannual compounding. What should be the
Quotes for the dollar and euro are as follows: Spot contract midpoint S0€/$ = €0.8890/$ One-year forward contract midpoint F1€/$ = €0.8960/$ One-year Eurodollar interest rate i$ = 3% per
Suppose the spot rate starts at S0$/¥ = $0.0100/¥ and appreciates by 25.86%. a. What is the percentage appreciation of the yen in continuously compounded returns? b. Calculate the holding period
Suppose continuously compounded changes in the spot rate St$/¥ are independently and identically distributed (iid) as normal. The relation between the variance 2 of continuously compounded iid
How do currency forward and futures contracts differ with respect to maturity, settlement, and the size and timing of cash flows?
What is the primary role of the exchange clearinghouse?
Draw and explain the payoff profile associated with a currency futures contract.
What is a delta-hedge? A cross-hedge? A delta-cross-hedge?
What is the basis? What is basis risk?
How do you measure the quality of a futures hedge?
Today is April 1. Korea's LG Electronics (LG) expects to receive ¥160,000,000 from a Japanese customer in 60 days. The current spot exchange rate is Won0.1250/¥. The current futures price for June
You work for Hong Kong Telecom and are considering ways to hedge a £10 million cash inflow to be received in three months. The current spot rate is equal to the three-month forward exchange rate at
In what sense is a currency forward contract a combination of a put and a call?
What determines the intrinsic value of an option? What determines time value of an option?
Currency volatility is a key determinant of currency option value, but it is not directly observable. In what ways can you estimate currency volatility?

Showing 4700 - 4800 of 5864

First
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
Last

Get In Touch

About Us
Contact Us
Career
Jobs
FAQ
Campus Ambassador

Company Info

Security
Copyrights
Privacy Policy
Terms & Condition
SolutionInn Fee
Scholarship

Services

Sitemap
Fun
Definitions
Become Tutor
Study Help Categories
Recent Questions
Expert Questions

Copyright © 2024 SolutionInn All Rights Reserved.

Get the SolutionInn - Study Help App