Finance (FIN494)

FIN 494 Exam Prepared 3_2020 Question 1 1. The S&P 500 futures has a multiplier 250. What is the delta of a long position in ten futures contracts? +1 +250 +2,500 +25,000 10 points Question 2 1. S&P 500 is now at 2,000. Ignore interest rate (assume everything is given in PV terms). Suppose you short a $20M portfolio with a beta of 0.8. Find the delta of your portfolio. 8,000 10,000 -8,000 ...

FIN 494 Homework 7 Solutions_2020 Problem 1 Which of the Greeks has a positive sign for a call option, but negative sign for a put option? a. Vega a. Delta b. Gamma c. Theta Problem 2 Option is a dollar change in the value of the option per $1 change in the value of the underlying. a. Delta b. Elasticity c. Theta d. Vega Problem 3 When dynamically hedging an option position to make it delta-neutral, the trader needs to trade a. The underlying secu...

FIN 494 Final Exam Prepared_2020 @3,4,6 10check 15 Exchange rate is currently $0.7 US per 1 Canadian Dollar. Interest rate is 2% in the US and 1% in Canada. A bank is short a futures contract on 1,000,000 Canadian Dollars with F= $0.75 per unit, maturing in one year. What position should the bank take to hedge the currency risk? Delta is position size discounted by the foreign interest rate. It should be negative because the bank is short. Delta = - 1,000,000 / 1.01 = -990,099 To ...

FIN 494 Homework 2 Solutions_2020 Problem 1 Quoted price of the bond is $105. Coupon is 10% per year, paid twice a year. Par value is $100. The most recent coupon was paid 50 days ago, and the next coupon will be paid 132 days from now. Find the cash price of the bond. Round to the nearest integer. a. 100 b. 106 c. 111 d. 115 Accrued Interest = 5 * 50 / 182 = 1.37 Cash price = 105 + 1.37 = 106.37 Problem 2 Cash price of the bond is 116.978. The next coupon of ...

FIN 494 Homework 4 Solutions_2020 Problem 1 Company X, which is a chemical manufacturer, uses crude oil and buys it in the spot market on a monthly schedule. A crude oil swap is quoted by the dealer at $25. Which of the following statements is correct? a. The company should sell the swap to hedge b. In a month when the spot price of oil is above $25, the company will pay the difference to the counterparty c. In a month when the spot price is below $25, the company will pay the differe...