2. Suppose that you short the S&R index for $1000 and sell a 1000-strike put. Construct a...
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2. Suppose that you short the S&R index for $1000 and sell a 1000-strike put. Construct a table mimicking Table 1 that summarizes the payoff and profit of this position.
Verify that your table matches Figure 5.
For the following problems assume the effective 6-month interest rate is 2%, the S&R 6-
month forward price is $1020, and use these premiums for S&R options with 6 months to expiration:
Strike Call Put
$950 $120.405 $51.777 1000 93.809 74.201 1020 84.470 84.470 1050 71.802 101.214 1107 51.873 137.167
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Related Book For
Derivatives Markets Pearson New International Edition
ISBN: 978-1292021256
3rd Edition
Authors: Robert L. Mcdonald
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