Financial Markets, Securities and Derivatives

Financial Markets, Securities and Derivatives

Students must complete BOTH tasks, but submit each one separately.

Task 1 (60%) (1000 words)

(a)  Use Bloomberg to estimate the prices and the Greeks of the following stock index options

Note that these are FTSE-100 Index Options and the value of the index today is assumed to be 6,100. The options should be priced within the Black & Scholes framework using the following inputs: rate of interest 1.50%p.a., dividend yield 0.00%, and volatility 4.00% p.a.
State clearly each necessary step requested to compute the price and the Greeks of the options above.
(b)  Write a short report with a critical summary of the results.

Financial Markets, Securities and Derivatives

Task 2 (40%) (600 words)

Consider the Single Index Model (SIM).

(a) State and comment on all the main assumptions underlying the SIM.

(b) Use Bloomberg to collect data on 4 stocks. Assume that you invest an equal amount of your wealth on each stock and build up a portfolio. Estimate:
(i)  The beta of your portfolio; comment your empirical results

(ii)  The market risk and non-market risk; comment on your results.

State all your assumptions and computations.

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By admin in Essays on November 5, 2016