FM07
Options,
Futures & Other Derivatives
(For CNM
Cases)
Assignment –
II
Assignment
Code: 2016FM07A2 Last date of Submission: 30th
April 2016
Maximum Marks: 100
Attempt all
questions. All the questions are compulsory & carry equal marks.
Section-A
1. What is a Swap Rate? What is the relationship between Swap
rates & Par yields?
2. “An
American option is always worth atleast as much as a European option on the
same asset with the same
strike price & exercise date” Explain.
3. What trading strategy creates a reverse calendar spread? Also
explain how an aggressive bear spread
can be created using options.
4. Explain the principle of risk-neutral valuation.
Section-B
Case
Study
The shares of a company are being
sold for Rs.50 per share. A call option (strike price of Rs.49) for 200 days is
available at Rs.4 per share. The annual risk free rate of interest is 7%. The
standard deviation of the return of this share may be considered as 0.3. Find
out the value of the option. Use black & Scholes model, given that the
expiry period of the call option is 200 days.
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