100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
RSK4805 Assignment 3 2023 (ANSWERS) $2.84   Add to cart
Quickly navigate to
Preview
  2.  
  3. University Of South Africa (Unisa)
  4.  
  5. RSK4805 - Market Risk Management (RSK4805)

Other

RSK4805 Assignment 3 2023 (ANSWERS)

2 reviews
 243 views  22 purchases
  • Course
  • RSK4805 - Market Risk Management (RSK4805)
  • Institution
  • University Of South Africa (Unisa)

RSK4805 Assignment 3 2023 (ANSWERS) Question 1 (25 marks) 1.1 An analyst for LevelUP gathered the following information regarding a futures contract: • Current spot-market price of R60 • The continuous compounded risk-free interest rate of 8.5% per annum • The actual futures price...

[Show more]

Preview 2 out of 9  pages

Document information

  • July 19, 2023
  • 9
  • 2022/2023
  • Other
  • Unknown

Subjects

  • rsk4805 assignment 3 2023 answers

Written for

  • University of South Africa (Unisa)
  • RSK4805 - Market Risk Management (RSK4805)
All documents for this subject (3)

2  reviews

review-writer-avatar

By: elliotmkanya • 1 year ago

review-writer-avatar

By: kamogelom911 • 9 months ago

Seller

avatar-seller
itsbesttutors

Reviews received

Content preview

, QUESTION 1.


1.1 To calculate the price of the future contract for delivery in six months, we can use the
formula for the cost of carry model:


Future price = Spot price * e^(r * t)


Where:
Spot price = R60 (current spot-market price)
r = Risk-free interest rate = 8.5% per annum = 0.085
t = Time to delivery in years = 6 months / 12 months = 0.5


Future price = R60 * e^(0.085 * 0.5)
Future price = R60 * e^0.0425
Future price = R60 * 1.043402
Future price = R62.0041


The calculated price of the future contract for delivery in six months is R62.0041.


To determine whether the contract is overpriced, underpriced, or correctly priced, we
compare the calculated price (R62.0041) with the actual futures price (R61). Since the
calculated price is higher than the actual futures price, the contract is underpriced.


1.2 To estimate the impact of a market shock on the value of the delta-neutral portfolio, we
need to consider both the gamma and vega.


Gamma represents the change in the portfolio's delta for a given change in the underlying
asset price. In this case, the gamma is 55, indicating that for every R1 change in the
underlying asset price, the portfolio's delta will change by 55.


Vega represents the change in the portfolio's value for a 1% change in the underlying
asset's volatility. In this case, the vega is 27, given as a percentage. To calculate the
actual value change due to a 5% increase in volatility, we multiply the vega by the
percentage change:

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller itsbesttutors. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $2.84. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

67474 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$2.84  22x  sold
  • (2)
  Add to cart