MAF 713 Futures, Options and Other Derivatives Assignment
Added on 2020-02-19
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Running head: FUTURE OPTIONS AND OTHER DERIVATESFuture options and other derivatesName of the Student:Name of the University:Author’s Note:Course ID:
1FUTURE OPTIONS AND OTHER DERIVATESTable of ContentsQuestion 1:.................................................................................................................................2Question 2:.................................................................................................................................3Reference:..................................................................................................................................6
2FUTURE OPTIONS AND OTHER DERIVATESQuestion 1:Constructing the synthetic treasury bill positionValueStay long with the stock61Keep the put long 0.08 Keep the call short-2Synthetic 59.08exercise price60The difference in value of exercise price and risk free rate is 6.23%T-bill 61,000.00 interest rate1.13%position of the T-bill 60,321.38 Position of the synthetic billValueLong stock 61,000.00 Long put 80.00 Short call (2,000.00)Total value 59,080.00 Net cash flow from operations 1,241.38 The overall table mainly uses put call parity, which directly help in identifying thearbitrage opportunity. This put call parity mainly includes being long on stock, long on putand short of call, which directly helps in gathering relevant value of the portfolio. Moreover,the arbitrage opportunity has mainly allowed the investors to gain a net cash flow fromoperations of 1,241.38 by selling 1000 shares of the company. Cerreia-Vioglio, Maccheroniand Marinacci (2015) stated that put call parity mainly allows the investors to adequately takeadvantage of the arbitrage opportunity portrayed in the stock. Question 2:ParticularsValuePortfolio worth 150,000,000 Put option worth 145,000,000 Volatility15%Risk free rate4%
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