Task 1(a) Use Bloomberg to estimate the prices and the Greeks of the following stock index options Strikes 10,000 10,400 10,800 Call-3 months Put-6 months Note that these are DJIA Index Options and the value of the index today is assumed to be 10,500. The options should be priced within a Black & Scholes framework using the following inputs: rate of interest 1.00%p.a., dividend yield 0.00%, and volatility 20.00% p.a. State clearly each necessary step requested to compute the price and the Greeks of the options above. (b) Write a short report with a critical summary of the results.

Task 2 (a) Describe and critically evaluate the Single Index Model. (b) Use Bloomberg to collect data on 4 stocks from the FTSE 100 index. Assume that you invest an equal amount of your wealth on each stock and build up a portfolio. Assume no dividends are paid. Estimate: (i) The beta of your 4 stocks; comment on your results (ii) The beta of your portfolio; comment on your results (iii) The market risk and non-market risk; comment on your results