A. Consider an at-the-money (ATM) short straddle position (i.e. a position obtained by selling an equal number of put and call options with the same strike price). a scenario in which underlying stock price remains unchanged and implied volatility drop substantially would result in a decrease in gamma

B. consider a contingent claim XT= f(T,(rt)t?[0,T]) for some deterministic function f) where the process (rt)t?0, as well as zero coupon bonds with maturities T1 and T2 are traded in the market ( with 0

C . you are a firm with a variable interest payment L( T, S) due at time s, where T

D. consider a payer swap you entered into to lock in swap rate equal to K > 0. At time u? (0,T), you mark to your market position based on swap rate quotes on swap contracts with residual maturity T -u and reset/payment fate coinciding with those payer swap already in your portfolio. The market quotes a (counterparty risk free) swap rate s(u) >K at the time u. Assuming your counterparty is credit risk free, your position is making money

E. consider the same position as in question c above. Your counterparty is credit risky, whereas you are not. The market value of your FRA decreases relative to the risk free case of question c above.

Question 2: In this question will again compute a mean and 5. variance by hand. Suppose we had the following data: 5, 5, 5, 5, Fill in the table using the same approach as in question 1. Then, sum up the numbers entered in column C for the table below to compute the sample variance: $ 2 E(x - 2)? n - 1 Your sample variance should have been 0, otherwise you made a mistake. Correct the mistake if needed. Intuitively, why do you think the variance is 0 for this data set? column A column B column C X ( x - X ) ( x - x ) 5 n = 5 5 X =CHAPTER 1 Law and Legal Reasoning 5 UNIFORM LAWS During the 1800s, the differences orders, and decisions of administrative agencies. An among state laws frequently created difficulties for administrative agency is a federal, state, or local businesspersons conducting trade and commerce government agency established to perform a specific among the states. To counter these problems, a group function. Administrative law and procedures consti- of legal scholars and lawyers formed the National tute a dominant element in the regulatory environ- Conference of Commissioners on Uniform State Laws ment of business. (NCCUSL, www.uniformlaws.org) in 1892 to draft Rules issued by various administrative agencies uniform laws (model statutes) for the states to con- now affect almost every aspect of a business's opera- sider adopting. The NCCUSL still exists today and tions. Regulations govern a business's capital struc- continues to issue uniform laws. ture and financing, its hiring and firing procedures, Each state has the option of adopting or rejecting a its relations with employees and unions, and the way uniform law. Only if a state legislature adopts a uniform it manufactures and markets its products. Regulations law does that law become part of the statutory law of that enacted to protect the environment also often play a state. Note that a state legislature may adopt all or part significant role in business operations. of a uniform law as it is written, or the legislature may rewrite the law however the legislature wishes. Hence, FEDERAL AGENCIES At the national level, the cabinet even though many states may have adopted a uniform departments of the executive branch include numer- law, those states' laws may not be entirely "uniform." ous executive agencies. The U.S. Food and Drug The earliest uniform law, the Uniform Negotiable Administration, for example, is an agency within Instruments Law, was completed by 1896 and adopted the U.S. Department of Health and Human Services. in every state by the 1920s (although not all states Executive agencies are subject to the authority of the used exactly the same wording). Over the following president, who has the power to appoint and remove decades, other acts were drawn up in a similar man- their officers. ner. In all, more than two hundred uniform acts have There are also major independent regulatory been issued by the NCCUSL since its inception. The agencies at the federal level, such as the Federal Trade most ambitious uniform act of all, however, was the Commission, the Securities and Exchange Commission, Uniform Commercial Code. and the Federal Communications Commission. The president's power is less pronounced in regard to inde- THE UNIFORM COMMERCIAL CODE One of the most pendent agencies, whose officers serve for fixed terms important uniform acts is the Uniform Commercial and cannot be removed without just cause. Code (UCC), which was created through the joint efforts of the NCCUSL and the American Law Institute.' The UCC was first issued in 1952 and STATE AND LOCAL AGENCIES There are administrative has been adopted in all fifty states,' the District of agencies at the state and local levels as well. Commonly, Columbia, and the Virgin Islands. a state agency (such as a state pollution-control agency) The UCC facilitates commerce among the states by is created as a parallel to a federal agency (such as the Environmental Protection Agency). Just as federal stat- providing a uniform, yet flexible, set of rules govern- ing commercial transactions. Because of its impor- utes take precedence over conflicting state statutes, tance in the area of commercial law, we cite the UCC federal agency regulations take precedence over con- flicting state regulations. frequently in this text. We also present the full UCC in Appendix C. From time to time, the NCCUSL revises the articles contained in the UCC and submits Case Law and the revised versions to the states for adoption. Common Law Doctrines The rules of law announced in court decisions consti- Administrative Law tute another basic source of American law. These rules Another important source of American law is include interpretations of constitutional provisions, administrative law, which consists of the rules, of statutes enacted by legislatures, and of regulations created by administrative agencies. i. This institute was formed in the 1920s and consists of practicing attorneys, legal scholars, and judges, Today, this body of judge-made law is referred to I. Louisiana has not adopted Articles 2 and 24 (covering contracts for as case law. Case law-the doctrines and principles the sale and lease of gooch], however. announced in cases-governs all areas not covered byQuestion 6 (10 marks) Imaging Pty Ltd (Imaging) sells health care and consumer imaging products. Big Bank has a security interest over all of the business and assets of Imaging. Imaging has been struggling financially and has missed a loan repayment due to Big Bank. The loan agreement between Big Bank and Imaging provides that where there is a default in payment Big Bank is entitled to appoint a receiver. On 1 June 2019 Tim is appointed receiver of Imaging. Tim decides to sell the medical imaging assets. He lists the assets on Gumtree and takes the first offer. Tim decides that the medical imaging side of the business is not profitable and dismisses 15 employees. Advise Tim as to his rights and duties as receiver. .The ENDAnswer ALL questions: Question 1: Discuss the differences between a supply chain and supply chain management. Question 2: What are four key attributes of supply chain management? Question 3: What is the difference between a lean supply chain and an agile supply chain? Under which circumstances is each an appropriate supply chain approach to pursue? Question 4: What is the difference between relational and transactional exchanges? Give two examples of each Question 5: Discuss the role and function of Supply Chain Management in relation to the organization's objectives