1 create a portfolio with the following payoffs 50 if, Ask an Expert

Finance

1. Create a portfolio with the following payoffs:
50 IF St<=50
St IF 50<=St < 100
100 IF 100<=St

2. Stock trading at $200. The stock follows a lognormal distribution with drift of 10% and volatility of 20%. The risk free rate is 6%. What is the probability for a 6 month 100 put to expire in the money? Find N(-d2).
What is the risk neutral probability for a 6 month 100 put to expire in the money? Find N(-d2).

3. BASF European 3 month calls with exercise prices 50, 60, and 65. The calls are $4, 2.5 and 1.5 respectively. Can you identify any arbitrage opportunity?
4. YHOO trading at $50. ¬European 6 month 60 calls and puts are traded at:
Call Put
Bid/ask 10/11 5.5/6.5
If the risk free rate is 0%, can you identify any arbitrage opportunity?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91262765

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