Exam 23: Exotic Options: 2
Exam 1: Introduction to Derivatives19 Questions
Exam 2: An Introduction to Forwards and Options19 Questions
Exam 3: Insurance, collars, and Other Strategies20 Questions
Exam 4: Introduction to Risk Management21 Questions
Exam 5: Financial Forwards and Futures21 Questions
Exam 6: Commodity Forwards and Futures19 Questions
Exam 7: Interest Rate Forwards and Futures24 Questions
Exam 8: Swaps20 Questions
Exam 9: Parity and Other Option Relationships19 Questions
Exam 10: Binomial Option Pricing: Basic Concepts21 Questions
Exam 11: Binomial Option Pricing: Selected Topics19 Questions
Exam 12: The Black-Scholes Formula24 Questions
Exam 13: Market-Making and Delta-Hedging19 Questions
Exam 14: Exotic Options: I24 Questions
Exam 15: Financial Engineering and Security Design20 Questions
Exam 16: Corporate Applications20 Questions
Exam 17: Real Options22 Questions
Exam 18: The Lognormal Distribution20 Questions
Exam 19: Monte Carlo Valuation20 Questions
Exam 20: Brownian Motion and Itos Lemma19 Questions
Exam 21: The Black-Scholes-Merton Equation19 Questions
Exam 22: Risk-Neutral and Martingale Pricing19 Questions
Exam 23: Exotic Options: 220 Questions
Exam 24: Volatility18 Questions
Exam 25: Interest Rate and Bond Derivatives21 Questions
Exam 26: Value at Risk21 Questions
Exam 27: Credit Risk18 Questions
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The Nikkei index is 22,550,K = 21,000,σ = 0.19,rf = 0.04,S = 0.10,r = 0.08 and ?div = 0.01.The yen to dollar spot rate is 104 and the correlation coefficient is 0.30.What would be the dollar price of a 2-year equity-linked foreign exchange call?
Free
(Multiple Choice)
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Correct Answer:
A
Suppose S = $52.50,K = $50,σ = 0.25,r = 0.04 and div = 0.01.What is the price of a gap option with 156 days until expiration and K₁ = $32.00?
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(Multiple Choice)
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Correct Answer:
C
The concept created by Hakannson in 1976 to describe the exotic option like payoffs that could result without the need for a delta hedging requirement is known as:
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(Multiple Choice)
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Correct Answer:
D
What is the characteristic that makes options,like quantos,multivariate options?
(Essay)
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In a specific wager,Pat is paid $5.00 if the price of ABC Corp.is above $85.00.Currently,ABC Corp.price is $75.00,σ = 0.25,r = 0.04,div = 0 and the wager lasts 6 months.Pat receives nothing if the price is below $85.00.What is the value of her wager?
(Multiple Choice)
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Cyril is purchasing a down-and-in cash call.H = $45.00,S = $38.24,K = $35,σ = 0.33,r = 0.05,div = 0 and it expires in 140 days.What is the value of the option if the payment is $1.00?
(Multiple Choice)
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The Buckingham Casino offers to give every gambler one share of Buckingham Casino Corp.stock if the price drops below $40.00,as an incentive to spur business.If S = $45.25,σ = 0.15,r = 0.05 and div = 0,how much is this offer worth if it expires in 30 days?
(Multiple Choice)
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In a specific wager,Pat is paid $5.00 if the price of ABC Corp.is above $85.00.Currently,ABC Corp.price is $75.00,σ = 0.25,r = 0.04,div = 0 and the wager lasts 6 months.Pat is paid one share of ABC Corp.stock if the price is below $85.00.What is the value of her wager?
(Multiple Choice)
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Donald Trump offers to give you a partnership share in his casinos if the price of his shares drops below a certain level.He charges a nominal fee for this right.What is he offering you and is he wise?
(Essay)
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The current Nikkei index price is 21,200.Assume σ = 0.13,r = 0.05 and div = 0.015.If K = 20,000 yen and yen per dollar spot rates are 103,what is the dollar value of a 2-year call?
(Multiple Choice)
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In a specific wager,Pat is paid $5.00 if the price of ABC Corp.is above $85.00.Currently,ABC Corp.price is $75.00,σ = 0.25,r = 0.04,div = 0 and the wager lasts 6 months.If the price is below $85.00,Pat must pay $5.00.What is the net value of Pat's wager?
(Multiple Choice)
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Ask students to define Exotic options.Ask students to give examples of Exotic options.Have students define their example in terms of basic calls on puts.Demonstrate how all Exotic options are merely modified versions of basic options.
(Essay)
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Albert has accepted a wager to receive $5.00 if the price of Will Co.is above $35.00 per share.This right only exists if Will Co.drops below $33.00 sometime over the coming 100 days.Currently,Will Co.stock price is $38.24,r = 0.05,σ = 0.33,and div = 0.What is the value of Albert's position?
(Multiple Choice)
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How does a quanto hedge the currency risk a U.S.investor encounters when investing in foreign indexes?
(Essay)
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Eugene holds a collect-on-delivery call with S = $36.50,K = $35,σ = 0.22,r = 0.04,div = 0 and 270 days until expiration.What is the value of the European COD call?
(Multiple Choice)
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The Buckingham Casino offers to give every gambler one share of Buckingham Casino Corp.stock if the price drops below $40.00,as an incentive to spur business.If S = $45.25,σ = 0.15,r = 0.05 and div = 0,how much profit or loss is Buckingham incurring if they charge $0.25 to participate in this wager?
(Multiple Choice)
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What is the risk a U.S.investor faces when investing in foreign index securities,besides index fluctuations?
(Essay)
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A multivariate option that has a claim with a payoff determined by the average of two or more asset prices is known as:
(Multiple Choice)
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A multivariate option that has a claim with a payoff dependent upon the price of two different assets is known as:
(Multiple Choice)
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