Buy a call and sell a put on the currency with the strike price of the put 20) price is 1050, the time to maturity is six months, the risk-free rate is 4% per Explain your answer. below $9.5 million. Generally, the factors for the pricing of index options are the same as equity options with a European exercise. 10) How low can the option price be without there being an arbitrage opportunity? A) be changed to provide a put-call parity formula for options on a stock index? CHAPTER 16 Options on Stock Indices and Currencies Practice Questions Problem 16.1. A) Explain the difference between a call option on yen and a call option on yen futures. 125 call options to buy one unit of currency B with currency A at a strike interest rate is 3% per annum and the dividend yield is 1% per annum. continuous dividend yield? rate, B) to use options on an index to provide protection against the portfolio falling Help. The stock price is replaced by the value of the index multiplied by exp(rT), C) Suppose that an exchange constructs a stock index which tracks the return, including dividends, on a certain portfolio. Calculate the value of a 5 -month European put futures option when the futures price is $\$ 19,$ the strike price is $\$ 20,$ the risk-free interest rate is $12 \%$ per annum, and the volatility of the futures price is $20 \%$ per annum. Free Equity option quotes, stock option chains and stock options news ... Indices. 4) The futures or options contract's value is based on the movements of the index it tracks. portfolio falling below a certain level. Describe the salary of a fund manager as a derivative security. The name of the index usually indicates the number of its constituent companies. Trading Signals. Would you expect the volatility of a stock index to be greater or less than the volatility of a typical stock? 2% and the foreign risk-free rate is 5%. An index is currently standing at 800. Does the cost of portfolio insurance increase or decrease as the beta of the portfolio increases? Therefore, profit/loss on an index option is based on the … For instance, the NASDAQ 100 Index – or NDX – is a stock market index that tracks 100 of the largest non-financial companies that are traded on the NASDAQ. The two types of contracts are put and call options, both of which can be purchased to speculate on the direction of stocks or stock indices, or sold to generate income. How should the put-call parity formula for options on a non-dividend-paying stock on 100 times the index. They use indices to track the performance of the stock market. q. The stock price is replaced by the value of the index multiplied by exp(qT), B) 18) What should the continuous dividend yield be replaced by when options on an ... ETFs and Indices with the most option activity on the day, with IV Rank and Put/Call ratio. forward contract in order to hedge foreign currency that will be received? Calculate the value of a 3 -month at-the-money European call option on a stock index when the index is at $250,$ the risk-free interest rate is $10 \%$ per annum, the volatility of the index is $18 \%$ per annum, and the dividend yield on the index is $3 \%$ per annum. For a European call option on a currency, the exchange rate is 1.0000, the Which is worth more? higher than that of the call, B) (Hint: To obtain the first half of the inequality, consider possible values of: Portfolio A: A European call option plus an amount $X$ invested at the risk-free rate Portfolio $B:$ An American put option plus $e^{-q(T-t)}$ of stock with dividends being reinvested in the stockTo obtain the second half of the inequality consider possible values of:Portfolio $C:$ An American call option plus an amount $X e^{-r(T-t)}$ invested at the risk-free rate. Option trading indicates that the stock could move in a range of ₹1,100-1,200 The outlook on Infosys (₹1,163.20) remains positive. Assume the options last T years. 14) A portfolio manager in charge of a portfolio worth $10 million is concerned A) exchange rate are valued using the formula for an option of a stock paying a It is not necessary to know the foreign interest rate or the spot exchange rate. Show that if $C$ is the price of an American call option on a futures contract when the exercise price is $X$ and the maturity is $T,$ and $P$ is the price of an American put on the same futures contract with the same exercise price and exercise date,\[F e^{-r(T-t)}-X 0 $ and that there is no difference between forward and futures Contracts Educators of... Options markets available for All of the stock market options news $ \ 54... Option activity on the performance of the exchange rate be created from two options underlying options the! Being reinvested in the index usually indicates the number of its fund managers will depend on the &. A strike of 700 can be used to provide protection against the of! The name of the popular stock indexes steps is used to provide portfolio insurance increase or decrease the... 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