Suppose the 1-year futures price on a stock-index portfolio is
1914; the stock-index is currently 1900;...
Suppose the 1-year futures price on a stock-index portfolio is
1914; the stock-index is currently 1900; the 1-year risk-free
interest rate is 3%; and the year-end dividend that will be paid on
a $1,900 investment in the market index portfolio is $40.
By how much is the contract mispriced?
Formulate a zero-net-investment arbitrage portfolio and show
that you can lock in riskless profits equal to the futures
mispricing. Show your strategy in a table outlining the initial and
terminal values of your strategy
Now assume (as is true for small investors) that if you short
sell the stocks in the market index, the proceeds of the short sale
are kept with the broker, and you do not receive any interest
income on the funds. Is there still an arbitrage opportunity
(assuming that you do not already own the shares in the index)?
Explain and detail your answer in a table
d) Given the short-sale rules, what is the no-arbitrage bond for
the stock-futures price relationship? That is, given a stock index
of 1,900, how high and how low can the futures price be without
giving rise to arbitrage opportunities?
The one-year futures price on a particular stock index portfolio
is $1,825, the stock index is currently 1,800, the one-year
risk-free interest rate is 3%, and the year-end dividend that will
be paid on an $1,800 investment in the index portfolio is $25. a.
By how much is the contract mispriced? b. Formulate a
zero-net-investment arbitrage portfolio, and show how you can lock
in riskless profits equal to the futures mispricing. c. Now assume
that if you short-sell the stocks...
11. Suppose S&P 500 index futures price is currently 1200.
You wish to purchase four futures contracts on margin
a. What is the notional value of your position?
b. Assuming 10% initial margin, what is the value of the
initial margin?
c. Assume there is no interest rate on your margin account and
the maintenance margin is 80% of initial margin. What is the
greatest S&P 500 index futures price at which will you receive
a margin call?
"The 2-year S&P 500 index futures price is currently at
$3425. If you are long 4 contracts of the S&P 500 index future
contracts with 2-year maturity and with a delivery price of $3000,
what's the value of your futures position. The continuously
compounding interest rate on dollar is 1%. Each contract is 100
shares. Round to integer. "
Suppose the FAMA index futures is currently at 10,000 and the
initial margin is 12%. You wish to enter into 30 FAMA
short futures contracts. Each contract consists
of 200 FAMA futures.
What is the notional value of your position?
What is the value of the initial margin?
At what futures price will you get a margin call if the
maintenance margin is 70%.
Suppose you earn a continuously compounded rate of 5.5% on your
margin balance and your position...
Suppose the value of the S&P 500 Stock Index is currently
$3,350.
a. If the one-year T-bill rate is 4.6% and the
expected dividend yield on the S&P 500 is 4.2%, what should the
one-year maturity futures price be? (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
b. What would the one-year maturity futures price
be, if the T-bill rate is less than the dividend yield, for
example, 3.2%? (Do not round intermediate calculations.
Round your...
Suppose that the spot price of oil is US$19,
The quoted 1-year futures price of oil is us$16
The 1-year US$ interest rate is 5% per annum
The storage cost of oil are %2 per annum
is there an arbitrage opportunity? is yes, please explain how
you can observe this opportunity.
Suppose the value of the S&P 500 Stock Index is currently
$2,050. If the one-year T-bill rate is 5.5% and the expected
dividend yield on the S&P 500 is 5.0%.
a. What should the one-year maturity futures
price be? (Do not round intermediate
calculations.)
Futures price
$
b. What would the one-year maturity futures
price be, if the T-bill rate is less than the dividend yield, for
example, 4.0%? (Do not round intermediate
calculations.)
Futures price
Suppose a stock currently trades at a price of 150. The stock
price can go up 33% or down 15%.The risk free rate is 4.5%
1. use a one period binomial model to calculate the price of a
put option with exercise price of 150.
2. Suppose the put price is currently 14, show how to execute an
arbitrage transaxtion that will earn more than the risk free rate .
use 10,000 put options.
3. Suppose the put price is...
Suppose the current stock price is $120 and the stock price in a
year can be either $150 or $100. The risk-free rate is 2% per year,
compounded annually. Compute the price of a European put option
that expires in a year. The strike price is K=$130 (Hint: This is a
put option case, not a call option. Be careful when you compute the
cash-flow at expiration date. All other calculations should be the
same as call option case.)
The stock price of Comet Inc. is currently $30. The stock price
a year from now will be either $50 or $10 with equal probabilities.
The interest rate at which investors can borrow is 5%. Using the
binomial option pricing model (OPM), the value of a call option
with an exercise price of $40 and an expiration date one year from
now should be worth what?