Get 20% Off + \$20 Signup Bonus ! Limited Time, Hurry !

Get 24x7 live help from our Top Tutors. All subjects covered.

250 words

Students Who Viewed This Also Studied

10 Pages
Gross Plant and Equipment

123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657 A B C D E F G H David's Shooting Supplies, Inc. Balance Sheets\$ Millions Assets 31-Dec-20 31 ...

Course

MBA635

Subject

Finance

University

Queens University of Charlotte

Season

spring

3 Pages
BAO2001 Corporate Finance

o : Systematically analyse the financial press and interpret the information in relation to Australian and global financial institutions;o LO 2: Collaboratively, synthesise the theoretical and practic ...

Course

BAO2001

Type

Course Work

Subject

Finance

University

Victoria University

146 Pages
AF6004 Accounting and Finance

Question: You are a financial analyst, advising clients on investment decisions. A client is interested in investing £500,000 in your chosen company. The client requires you to produce a detail ...

Course

AF6004

Type

Programming

Subject

Finance

University

Northumbria University

2 Pages
INT 3133 International Market Entry Strategy

Description 1. Select an industry. Such as technology, food. 2. Select a domestic (haven't done any export or import yet) medium or large size of company. 3. Follow the template for your business plan ...

Course

INT3133

Type

Assignment

Subject

Finance

University

Lambton College

Question

Question

The stock price of  rm XYZ is currently \$50. Let ln St denote the log of stock price at time t, assumed to follow the stochastic di erential equation (SDE) of d ln St = 0:03dt + 0:2dWt

under the real-world probability measure P, where Wt is a standard Brownian motion. The constant continuous dividend yield of
rm XYZ is 1% per annum and the continuously com- pounded risk-free rate is 4% per annum.

(a) Using 1000 simulation scenarios and equal sub-intervals of t = 1 12 year, estimate the

mean of S5 (i.e., the stock price at the end of 5 years from now) for  rm XYZ. Compare the estimated value with the expected value of S5 under measure P.

(b) Suppose that you want to estimate the current value of a European cash-or-nothing put option written on stock XYZ with a time to expiry of 5 years from now and a strike price of EP (S5) from part (a). This binary option pays \$50 when it is exercised.

(i) Using the same set of random numbers in the 1000 simulation scenarios as used previously, perform the necessary simulations to estimate the current price of the binary option.

(ii) Following from part (i), estimate the risk-neutral probability of exercising the binary option at expiry.

(iii) Calculate the theoretical price for the binary option and also the corresponding risk- neutral probability of exercising the option at expiry. Compare these theoretical values with the estimated values in parts (i) and (ii).

(iv) Suppose that the estimated price in part (i) is the market observed price for the

binary option, determine the implied volatility of stock XYZ and compare the answer with the assumed value given above.

(v) Estimate the delta of the binary option by performing simulations using the same set of random numbers in part as used previously and relevant parameters except

that the current stock price is changed slightly to \$50:10. Compare your answers to the theoretical value of the binary option's delta.

(c) Suppose that you want to construct a portfolio consisting of the cash-or-nothing put option and the underlying stock XYZ.

(i) Determine the composition of this portfolio such that it is delta-neutral at time 0  t < T.

(ii) Consider a scenario where the current (i.e., at time 0) stock price has jumped (you may treat this as a sudden change) from \$50 to \$50.10. Using the estimated delta 2

in part (b) (v), calculate the value of the portfolio before and after the jump and show that the portfolio is indeed delta neutral at time 0.

(d) Consider the numerical holdings of the portfolio at time 0 as used in part (c) (ii). Assume that the current stock price is \$50 (not \$50.10 as described in part (c) (ii)) and the value of the cash-or-nothing put option exactly equals to the theoretical price at all times.

Using the 1000 simulation scenarios as used previously, calculate the value of this delta-neutral portfolio shortly before time t = 1 12 under each scenario.

Are the values of the delta-neutral portfolio the same for all scenarios? Explain your Fndings.

ACST888 Quantitative Asset and Liability Modelling 2

Solved by qualified expert

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Hac habitasse platea dictumst vestibulum rhoncus est pellentesque. Amet dictum sit amet justo donec enim diam vulputate ut. Neque convallis a cras semper auctor neque vitae. Elit at imperdiet dui accumsan. Nisl condimentum id venenatis a condimentum vitae sapien pellentesque. Imperdiet massa tincidunt nunc pulvinar sapien et ligula. Malesuada fames ac turpis egestas maecenas pharetra convallis posuere. Et ultrices neque ornare aenean euismod. Suscipit tellus mauris a diam maecenas sed enim. Potenti nullam ac tortor vitae purus faucibus ornare. Morbi tristique senectus et netus et malesuada. Morbi tristique senectus et netus et malesuada. Tellus pellentesque eu tincidunt tortor aliquam. Sit amet purus gravida quis blandit. Nec feugiat in fermentum posuere urna. Vel orci porta non pulvinar neque laoreet suspendisse interdum. Ultricies tristique nulla aliquet enim tortor at auctor urna. Orci sagittis eu volutpat odio facilisis mauris sit amet.

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.

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Hac habitasse platea dictumst vestibulum rhoncus est pellentesque. Amet dictum sit amet justo donec enim diam vulputate ut. Neque convallis a cras semper auctor neque vitae. Elit at imperdiet dui accumsan. Nisl condimentum id venenatis a condimentum vitae sapien pellentesque. Imperdiet massa tincidunt nunc pulvinar sapien et ligula. Malesuada fames ac turpis egestas maecenas pharetra convallis posuere. Et ultrices neque ornare aenean euismod. Suscipit tellus mauris a diam maecenas sed enim. Potenti nullam ac tortor vitae purus faucibus ornare. Morbi tristique senectus et netus et malesuada. Morbi tristique senectus et netus et malesuada. Tellus pellentesque eu tincidunt tortor aliquam. Sit amet purus gravida quis blandit. Nec feugiat in fermentum posuere urna. Vel orci porta non pulvinar neque laoreet suspendisse interdum. Ultricies tristique nulla aliquet enim tortor at auctor urna. Orci sagittis eu volutpat odio facilisis mauris sit amet.

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.

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Hac habitasse platea dictumst vestibulum rhoncus est pellentesque. Amet dictum sit amet justo donec enim diam vulputate ut. Neque convallis a cras semper auctor neque vitae. Elit at imperdiet dui accumsan. Nisl condimentum id venenatis a condimentum vitae sapien pellentesque. Imperdiet massa tincidunt nunc pulvinar sapien et ligula. Malesuada fames ac turpis egestas maecenas pharetra convallis posuere. Et ultrices neque ornare aenean euismod. Suscipit tellus mauris a diam maecenas sed enim. Potenti nullam ac tortor vitae purus faucibus ornare. Morbi tristique senectus et netus et malesuada. Morbi tristique senectus et netus et malesuada. Tellus pellentesque eu tincidunt tortor aliquam. Sit amet purus gravida quis blandit. Nec feugiat in fermentum posuere urna. Vel orci porta non pulvinar neque laoreet suspendisse interdum. Ultricies tristique nulla aliquet enim tortor at auctor urna. Orci sagittis eu volutpat odio facilisis mauris sit amet.

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.

MyAssignmenthelp.com is a multifunctional PhD dissertation writing help provider in USA. Being a reputed writing service provider, we ensure that our dissertation help service fit into the students budgets. In order to do so, we provide cheapest dissertation writing services to make students comfortable with our services. Our services cover different educational disciplines such as economics dissertation help, marketing dissertation help, accounting dissertation help, engineering dissertation help, etc.

More ACST888 ACST888 Quantitative Asset and Liability Modelling 2: Questions & Answers

Q

Gross Plant and Equipment

123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657 A B C D E F G H David's Shooting Supplies, Inc. Balance Sheets\$ Millions Assets 31-Dec-20 31-Dec-19 Current Assets: Cash/Cash equivalents 288.50 \$ 16.60 \$ ...

Q

BAO2001 Corporate Finance

o : Systematically analyse the financial press and interpret the information in relation to Australian and global financial institutions;o LO 2: Collaboratively, synthesise the theoretical and practical developments in finance in our dynamic, global context;o LO 3: Decode and interpret Corporate Fin ...

Q

AF6004 Accounting and Finance

Question: You are a financial analyst, advising clients on investment decisions. A client is interested in investing £500,000 in your chosen company. The client requires you to produce a detailed report on this company clearly showing your recommendation on whether or not the investment shoul ...

Q

INT 3133 International Market Entry Strategy

Description 1. Select an industry. Such as technology, food. 2. Select a domestic (haven't done any export or import yet) medium or large size of company. 3. Follow the template for your business plan (expanding your business in another country) You will prepare a business plan to become a global co ...

Content Removal Request

If you are the original writer of this content and no longer wish to have your work published on Myassignmenthelp.com then please raise the content removal request.