Put–Call Parity - A put and a call have the same maturity and strike price. If they have the same price, which one is in the money? Prove your answer and provide an intuitive explanation.
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Put–Call Parity - A put and a call have the same maturity and strike price. If they have the same price, which one is in the money? Prove your answer and provide an intuitive explanation.
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- Q (a) A put and a call have the same maturity and strike price. If they have the same price, which one is in the money? Prove your answer and provide an intuitive explanation. (b) You find a put and a call with the same exercise price and maturity. What do you know about the relative prices of the put and call? Prove your answer and provide an intuitive explanation. Please explain step by step. I have seen other answers but still very confused.Answer the following in a couple of sentences. e) Compare swaps with forwards f) Why do you buy on margin?Payoff from entering into a forward contract does the buyer have more to gain going long than the seller has to lose going short, profits if the price of the underlying at expiration exceeds the forward price and/or gains from owning the underlying versus owning the forward contract are equivalent? Explain why one or more of the options above are correct. and why, if any of the remaining options are incorrect.
- Explain the call-put parity relation and how it is justified. Black-Scholes-Merton formula uses five variables to calculate the price of call and put options. Explain each of these variables incorporated in Black-Scholes-Merton formula. Show how the change in these variables affects the price of option. Show how these variables are grouped to show put-call parity relationship and suggest the condition in which there is an arbitrage opportunity. (Explain each of the things in detail with an appropriate examples). Answer the following in a couple of sentences d) Compare swaps with forwards f) Why do you buy on margin?Explain the concept of Contango, Backwardation & Roll-Yield? Also explain how positive and negative roll yield can make a difference while trading?
- Briefly explain law of one price with respect to the arbitrage pricing theory.A) Explain the relationship between strike prices and implied volatilities under a price jump scenario. B) How does a dividend payment impact the option price?did hedging reduce volatility of the realized price?Answer Yes or No and explain
- True or false explain a. For , when the spot price is the strike price, then the profit/loss will be equal to the spot price minus the minus the premium. b. For , when the spot price is the strike price, then the profit/loss will be equal to the strike price minus spot the price minus the .Briefly explain the difference between the CAPMand the Arbitrage Pricing Theory (APT)a) Let VK(t, T) be the value of a forward contract on an asset with delivery price K, VK(t, T) = (F(t, T) − K)e −r(T −t) . a) Verify that VK(T, T) equals the payout of a forward contract with delivery price K. For an asset that pays no income, substitute the expression for its forward price into the above equation and give an intuitive explanation for the resulting expression. b) Suppose at time t0 you go short a forward contract on an asset that pays no income with maturity T (and with delivery price equal to the forward price). At time t, t0 < t < T, suppose both the price of the asset and interest rates are unchanged. How much money have you made or lost? This is sometimes called the carry of the trade.
