prepare down and illustrate out the Black-Scholes European call option pricing formula. Discuss and describe how call prices it delivers change with each of the inputs to the computations.
What is the price of European call option on a non-dividend paying stock when the stock price is $52, the strike price is $50 and the risk-free rate is 12% per annum, the volatility is 30% per annum and time to maturity is three months?
A call option with a strike price of $50 costs $2. A put option with strike price $45 costs $3. Illustrate out, using an appropriate diagram, how a strangle can be created from these two options. What is the pattern of profits from strangle?
A one month European put option on a non-dividend paying stock is now selling for $ 2.50. The stock price is $47, the strike price is $50 and the risk free interest rate is 6% per annum. What opportunities are there for arbitrageur?
Make a distinction between Transaction, Translation risk and economic risk in foreign exchange market. (Use an illustrative and numerical ex in each case.
In the case of transaction risks critically illustrate out how one can use forward-spot swap deals and forward-forward deals to manage the risk.
Examine how, as group treasurer, you can manage the translation risk of your multinational enterprise?