2. Assume the stock price follows a geometric Brownian motion, where current price So=50, expected return u=0.02 and volatility o=0.80. The risk-free interest rate r=0.05 p.a. a. Suppose that an investor short-sells 100,000 shares of the stock, what is the amount of loss that the investor is 99% certain that will not be exceeded in 1 months' time? (2 marks) b. Suppose that an investor sells a forward contract written on the stock with a maturity of 6 months. Assume the forward contract is for 100,000 shares of the stock, and the forward price Fo=$52.56. What is the amount of loss that the investor is 99% certain that will not be exceeded in 1 months' time? (1 mark) c. Suppose that an investor sells 100,000 binary options written on the stock, each option pays $100 if the stock price in 6 months exceeds $65. The current option price is $23.52. What is the amount of loss that the investor is 99% certain that will not be exceeded in 1 months' time? (2 marks) 2. Assume the stock price follows a geometric Brownian motion, where current price So=50, expected return u=0.02 and volatility o=0.80. The risk-free interest rate r=0.05 p.a. a. Suppose that an investor short-sells 100,000 shares of the stock, what is the amount of loss that the investor is 99% certain that will not be exceeded in 1 months' time? (2 marks) b. Suppose that an investor sells a forward contract written on the stock with a maturity of 6 months. Assume the forward contract is for 100,000 shares of the stock, and the forward price Fo=$52.56. What is the amount of loss that the investor is 99% certain that will not be exceeded in 1 months' time? (1 mark) c. Suppose that an investor sells 100,000 binary options written on the stock, each option pays $100 if the stock price in 6 months exceeds $65. The current option price is $23.52. What is the amount of loss that the investor is 99% certain that will not be exceeded in 1 months' time? (2 marks)