Derivative Instruments Paris Dauphine University - Master IEF (272)
You are managing a bond portfolio worth $6 million. The ... (Assume no difference between forward andfutures rates for the purposes of your calculations.) 1 ...
Derivative Instruments Paris Dauphine University - Master IEF (272) Jérôme MATHIS (LEDa) Exercises Chapter 6 Exercise 1 It is January 9. The price of a Treasury bond with a 12% coupon that matures on October 12, in four years, is quoted as 102-07. What is the cash price ? Exercise 2 A Eurodollar futures price changes from 96.76 to 96.82. What is the gain or loss to an investor who is long two contracts ? Exercise 3 (Done) The 350-day LIBOR rate is 3% with continuous compounding and the forward rate calculate from a Eurodollar futures contract that matures in 350 days is 3.2% with continuous compounding. Estimate the 440-day zero rate. Exercise 4 It is January 30. You are managing a bond portfolio worth $6 million. The duration of the portfolio in six months will be 8.2 years. The September Treasury bond futures price is currently 108-15, and the cheapest-to-deliver bond will have a duration of 7.6 years in September. How should you hedge against changes in interest rates over the next six months ? Exercise 5 Suppose that the Treasury bond futures price is 101-12. Which of the following four bonds is cheapest to deliver ? Bond Price Conversion Factor 1 125-05 1.2131 2 142-15 1.3792 3 115-31 1.1149 4 144-02 1.4026 Exercise 6 Suppose that the 300-day LIBOR zero rate is 4% and Eurodollar quotes for contracts maturing in 300, 398 and 489 days are 95.83, 95.62, and 95.48. Calculate 398-day and 489- day LIBOR zero rates. (Assume no di¤erence between forward andfutures rates for the purposes of your calculations.) 1
Exercise 7 (Done) On August 1 a portfolio manager has a bond portfolio worth $10 million. The duration of the portfolio in October will be 7.1 years. The December Treasury bond futures price is currently 91-12 and the cheapest-to-deliver bond will have a duration of 8.8 years at maturity. a) How should the portfolio manager immunize the portfolio against changes in interest rates over the next two months ? b) How can the portfolio manager change the duration of the portfolio to 3.0 years ? Exercise 8 The three-month Eurodollar futures price for a contract maturing in six years is quoted as 95.20. The standard deviation of the change in the short-term interest rate in one year is 1.1%. Estimate the forward LIBOR interest rate for the period between 6.00 and 6.25 years in the future.
Exercise 1 What is a lower boundfor the price of a four-month call option on a non-dividend- paying stock when the stock price is $28, the strike price is $25, and ...
paying stock when the stock price is $30 and the risk-free interest rate (with ... Exercise 4 The risk-free rate of interest is 7% per annum with continuous ...
The stock price is $47 and the strike price is $50. ... Exercise 2 An investor sells a European call option with strike price of K and maturity T ... Exercise 5 Describe the terminal value of the following portfolio : a newly entered-into long ... Sh
Exercise 1 (Done) Companies A and B have been offered the following rates per ... at the current exchange rate. The companies have been quoted the following ...
Exercise 1 An investor enters into a short forward contract to sell 100,000 British pounds ... Exercise 3 Suppose that you write a put contract with a strike price of $40 and an expiration ... sell 10 million Japanese yen on next year January 1.
Exercises Chapter 2. Exercise 1 ... Exercise 2 What does a limit order to sell at $2 mean? ... Exercise 9 Suppose that on October 24 (current year), a company sells one April (next year) ... It closes out its position on January 21 (next year).
Exercise 1 Call options on a stock are available with strike prices of $15, $171. 2. , and $20 and expiration dates in three months. Their prices are $4, $2, and $1.
Exercise 2 (Done) A company has a $20 million portfolio with a beta of 1.2. ... Exercise 4 (Done) On July 1, an investor holds 50,000 shares of a certain stock.
Exercise 5 The six-month and one-year zero rates are both 10% per annum. ... enables the holder to earn 9.5% for a three-month period starting in one year on a ...
Stochastic Calculus. Paris Dauphine ... Exercise 4 Consider a financial market with a money account, a stock, and an European call option on the stock with ...
Stochastic Calculus. Paris Dauphine ... A financial institution has just announced that it will trade a derivative that pays off an euro amount equal to lnST at time T ...
Exercise 2 A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is ...
Stochastic Calculus. Paris Dauphine University ... At date t = 0, a financial institution issues two derivatives that each matures at time t = 2. According to the ...
Definition. The day count is the way in which interest accrues over time. It is ..... If a bank funds long term assets with short term liabilities such as commercial ...
4. Summary. Jérôme MATHIS (LEDa). Derivative Instruments. Chapter 9. 10 / 39 ... make a riskless profit by buying the stock and selling the call option.
number of days between the two considered dates is calculated and Y denotes the ... of a dollar. â» The quoted price is for a bond with a face value of $100. ... bond would have per dollar of principal (i.e., $1 par) on the first day of the delivery
Consider a 3-year swap initiated on March 5, 2013, between Microsoft and Intel. We suppose Microsoft agrees to pay Intel an interest rate of 5% per annum on a ...
