TAILIEUCHUNG - Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_11

Tham khảo tài liệu 'annuities and other retirement products: designing the payout phase (directions in development)_11', tài chính - ngân hàng, ngân hàng - tín dụng phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 260 Questions and answers 8 a Long b Long c Short d Short 9 You will be assigned a purchase of 100 shares at 10 You will be assigned one short December futures contract at 280. 11 Your clearing firm will exercise for you and you will receive the cash differential between the index price and the strike price of the option - 520 . You have no remaining position. Remember the contract multiplier is 100 therefore you receive 945. 12 You will be assigned and you will pay the cash differential between the strike price and the index price 5525 - . You have no remaining position. Remember that the multiplier is 10 therefore you pay 454. 13 You have a profit. You don t want the risk of a large unforeseen move by the stock to the upside which could result in a loss and an unwanted assignment to a short stock position. You also want to avoid pin risk. You should soon buy this call back. If you want to continue with a short call position you could sell the November-December or November-January time spread thereby rolling your short call position to a more distant month. 14 False there is no early exercise possible for European options. 15 False stock and stock index puts have significantly greater early exercise premium than puts on futures contracts because they can be exercised to gain cash and therefore interest. Questions and answers 261 Chapter 4 questions 1 What is the difference between the historical and the implied volatility 2 Suppose that the S P 500 index has just made a 5 per cent downside correction. If the implied volatility of the near-term at-the-money put has increased then the implied volatility of the near-term at-the-money call has decreased. True or false 3 The implied volatility always adjusts to the 20-day historical volatility within several days. True or false 4 a A five-day historical volatility gives a more accurate indication of an underlying contract s volatility than a 30-day historical volatility. True or false b What

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