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###### management assigment

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### Question

calculation and explaination Question 1 Assume KBC stock is currently at S = \$100. After one period, the price will move to one of the following two values: [uS and dS], where [u = 1.2; d = 0.9]. A \$1.00 investment in the risk-free asset using continuous compounding will return \$1.10 at the end of the period. (a) Find the risk-neutral probabilities governing the movement of the stock price. ( 1 marks) (b) For a strike price of 100 for call, find the delta of the call. (1 marks) (c) For a strike of 100 for put, find the delta of the put. (1 marks) (d) Compute the difference between the call delta and the put delta and explain the answer you Get. (5 marks) Question 2 A bullish call spread is bullish on direction. Is it also bullish on volatility? Let’s assume the payoff diagram with exercise price is \$95 and \$100 for a call bull spread. Explain your answer. (2 marks)

Question 1
Assume KBC stock is currently at
S = \$100. After one period, the price will move to one of the following two values: [uS and dS], where [u = 1.2; d = 0.9]. A \$1.00 investment in the risk-free asset using continuous compounding will return \$1.10 at the end of the period.

(a) Find the risk-neutral probabilities governing the movement of the stock price. ( 1 marks)

(b) For a strike price of 100 for call, find the delta of the call. (1 marks)

(c) For a strike of 100 for put, find the delta of the put. (1 marks)

(d) Compute the difference between the call delta and the put delta and explain the answer you

Get. (5 marks)

Question 2
A bullish call spread is bullish on direction. Is it also bullish on volatility? Let’s assume the payoff diagram with exercise price is \$95 and \$100 for a call bull spread. Explain your answer. (2 marks)

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Tellus molestie nunc non blandit massa enim nec dui. Tellus molestie nunc non blandit massa enim nec dui. Ac tortor vitae purus faucibus ornare suspendisse sed nisi. Pharetra et ultrices neque ornare aenean euismod. Pretium viverra suspendisse potenti nullam ac tortor vitae. Morbi quis commodo odio aenean sed. At consectetur lorem donec massa sapien faucibus et. Nisi quis eleifend quam adipiscing vitae proin sagittis nisl rhoncus. Duis at tellus at urna condimentum mattis pellentesque. Vivamus at augue eget arcu dictum varius duis at. Justo donec enim diam vulputate ut. Blandit libero volutpat sed cras ornare arcu. Ac felis donec et odio pellentesque diam volutpat commodo. Convallis a cras semper auctor neque. Tempus iaculis urna id volutpat lacus. Tortor consequat id porta nibh.

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## More Computing and Engineering: Questions & Answers

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The process of digestion There is a chicken and chips shop near the school which is popular with the students. a) write a 700-word account EXPLAINING HOW the structure of the GI tract will aid the digestion of a meal of chicken, chips fried in batter and a can of coke and EXPLAIN SEVERAL ways in whi ...

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Hi.this is a magzine article. This assignment should be as a magzine....my email id [email protected] ...

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### management assigment

2000 words and the deadline is 17th march 2015 evening. my assignment question in the attachment. ...

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