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Question 4 a) The price of a non-dividend paying stock is $19 and the price of a three-month European call option on the stock with
Question 4 a) The price of a non-dividend paying stock is $19 and the price of a three-month European call option on the stock with a strike price of $20 is S1. The risk-free rate is 4% per annum. What is the price of a three-month European put option with a strike price of $202 9 co 0. 13 15 marks) 20 b) Suppose that you enter into a short futures contract to sell February Silver for $17.20 per ounce. The size of contract is 5,000 ounces. The initial margin is 110% of the maintenance margin of $5000 i. What change in the futures price will lead to a margin call? What happens if you do not meet the margin call? il. Complete the margin account below and discuss the impact of the daily closing prices below on your position in the silver futures and determine the profit or loss made if you close your position on 30/01/2022 Table 2: Variation Margin 1000 . COD HOD 6. . Futures Price Cumulative Margin Margin Date (S/oz) Gain/Loss Gain/Loss Account(S) Call 22/01/2022 18.0 5.5780 23/01/2022 18.2. 24/01/2022 18.5 25/01/2022 17.4 -- 150 26/01/2022 17.3 14.50 29/01/2022 17.2 27.010 30/01/2022 16.8 [13 marks] c) You have recently been employed by Quantum Analytics as the Chief Risk Officer. Given the fierce competition within the financial sector, your institution's core goal is to strategically create, enhance, and preserve value. How do you help your company achieve the above using risk management as a 10
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