1. An exotic option gives the holder the right but not the obligation to buy the right but not the obligation to sell an underlying asset in the future. Which of the following best describes this option? a) Up-and-in put b) Compound put on call c) Binary option d) Gap call e) Compound call on put 2. The standard deviation of returns on the ARIA500 stock index futures contract is 21%. The standard deviation of returns on an ARIA500 index tracking portfolio is 17%. The coefficient of correlation between the index futures returns and portfolio returns is 0.87. What is the value of the minimum variance hedge ratio? a) -0.03106 b) -1.07471 c) -0.70429 d) -1.0 e) -0.06048 3. Assume that the Fremont250 at close of trading yesterday was 5,250 and the daily volatility of the index was estimated as 0.87 percent per day at that time. The parameters in a GJR GARCH model are w = 0.000004, a = 0.05, and = 0.92. If the level of the index at close of trading today is 5,125, what is the new volatility estimate? a) 1.1476% per day b) 0.0312% per day c) 1.0133% per day d) 2.3362% per day e) 2.41% per day