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

Centre for Economic and Financial Studies Financial Markets, Securities and Derivatives (ECON 5009) Semester One Course coordinator: Dr Georgios Sermpinis In Course Assessment Questions Word limit: 1200 words for Task 1 and 800 words for Task 2 Task 1 (60%) (a) Use Bloomberg to estimate the prices and the Greeks of the following stock index options Strikes Call-3 months Put-6 months 10,000 10,400 10,800 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 (40%) (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. Coursework Submission Instructions Submit each task separately. You must submit ONE electronic copy via Moodle (see submission link below) and ONE hard copy. Your submission point for this assignment is: Adam Smith Business School Administration Suite: Reception. You will see the submission boxes before you reach the reception desk. These will be labelled for your course. Students submitting early can do so at the assessment centre at the Business School reception, handing in to postbox marked for early submission. The deadline for this assignment is 12:00 on Thursday 9th November 2017