Business, 19.12.2020 23:00 kimberlynassar1962

Q2. Underlying follows lognormal distribution and is current at $100. You put on a broken-wing butterfly (BWBF) position with the following three legs:

i. Long 1x 50 delta put where IV is 20 %;
ii. Short 2x 30 delta put where IV is 25 %;
iii. Long 1x 10 delta put where IV is 30 %;

There are three months b/f expiration. Riskfree rate is zero.

Q2a. What are the strikes of the three puts you will be using? (3 points)

Q2b. What are the gammas for each leg of the BWBF spread as well as for the combination? (3 points)

Q2c. What are the vega values for each leg as well as the overall vega? (3 points)

Q2d. Underlying moved up to $101 in one day. IV did not change for any leg. What is PnL due to delta, gamma and theta respectively (3 points)?

Q2e. Underlying moved down to $95 in one day. IV goes up from 20% to 22% for the 50 delta put, from 25% to 29% for the 30 delta put, and from 30% to 36% for the former 10 delta put. What is the PnL due to delta, gamma, theta and vega effect, and what is the overall total PnL? (3 points)

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 04:00

Which law would encourage more people to become homeowners but not encourage risky loans that could end in foreclosure? options: offering first time homebuyers tax-free accounts to save for down payments requiring all mortgages to be more affordable, interest-only loans outlawing home inspections and appraisals by mortgage companies limiting rent increases to less than 2% a year

Answers: 2

Answer

Business, 22.06.2019 08:00

Suppose the number of equipment sales and service contracts that a store sold during the last six (6) months for treadmills and exercise bikes was as follows: treadmill exercise bike total sold 185 123 service contracts 67 55 the store can only sell a service contract on a new piece of equipment. of the 185 treadmills sold, 67 included a service contract and 118 did not.

Answers: 1

Answer

Business, 22.06.2019 10:00

Your father offers you a choice of $120,000 in 11 years or $48,500 today. use appendix b as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a-1. if money is discounted at 11 percent, what is the present value of the $120,000?

Answers: 3

Answer

Business, 22.06.2019 11:20

Lusk corporation produces and sells 14,300 units of product x each month. the selling price of product x is $25 per unit, and variable expenses are $19 per unit. a study has been made concerning whether product x should be discontinued. the study shows that $72,000 of the $102,000 in monthly fixed expenses charged to product x would not be avoidable even if the product was discontinued. if product x is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be:

Answers: 1

Answer

You know the right answer?

Q2. Underlying follows lognormal distribution and is current at $100. You put on a broken-wing butt...

Questions