Question: Compare, using a numerical example, the range of potential payoffs and profits from a strangle and a straddle written on the same underlying asset. Demonstrate

  1. Compare, using a numerical example, the range of potential payoffs and profits from a strangle and a straddle written on the same underlying asset.
  2. Demonstrate how a plain vanilla interest rate swap can be constructed to be mutually beneficial to both parties. Support your analysis with a numerical example.
  3. Discuss the reasons why financial institutions perform the process of securitisation.
  4. Demonstrate how mortgage-backed securities and collateralised debt obligations are constructed.

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