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1) A binomial tree prices an American option at $3.12 and the corresponding European option at $3.0 The Black-Scholes price of the European option is $2.98. What is the control variate price of the American option? 2) The spot price […]

1) In a shout call option the strike price is $30. The holder shouts when the asset price is $40. What is the payoff from the option if the final asset price is $35? (Circle one) a. $0 b. $5 […]

1) Which of the following is true (circle one) a. Principals are not usually exchanged in a currency swap b. The principal amounts usually flow in the opposite direction to interest payments at the beginning of a currency swap and […]

1) For equities it is usually assumed that the number of trading days in the year is a. 365 b. 252 c. 262 d. 272 2) In a LIBOR-in-arrears swap the following is true (Circle one) a. The floating payment […]

1) An American put option to sell a Swiss franc for USD has a strike price of 0.80 and a time to maturity of 1 year. The volatility of the Swiss franc is 10%, the USD interest rate is 6%, […]

1) A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on the S&P index is 900. Futures contracts on $250 times the index can be traded. What trade is necessary to […]

1) Volatility can be defined as (circle one) a. The standard deviation of the return, measured with continuous compounding, in one year b. The variance of the return, measured with continuous compounding, in one year c. The standard deviation of […]

1) Consider a European call option on a currency. The exchange rate is 1.0000, the strike price is 0.9100, the time to maturity is one year, the domestic risk-free rate is 5% per annum, and the foreign risk-free rate is […]

1) Three-month European put options with strike prices of $50, $55, and $60 cost $2, $4, and $7, respectively. i. What is the maximum gain when a butterfly spread is created from the put options? ii. What is the maximum […]

1) The Black-Scholes and Merton pathbreaking papers on stock option pricing were published in (circle one) a. 1983 b. 1984 c. 1974 d. 1973 2) A portfolio of ten companies is formed. In a third-to-default swap (Circle one) a. There […]

1) A five-year interest rate swap that can be canceled at the two year point is (Circle one) a. The difference between two plain vanilla interest rate swaps b. The difference between a a plain vanilla interest rate swap and […]

1) On the floor of a futures exchange one futures contract is traded where both the long and short parties are closing out existing positions. What is the resultant change in the open interest? Circle one. a. No change b. […]