SIQ3004: Discuss the moneyness of your call and put warrants based on the latest date of your data. If your call and put warrants: Mathematics of Financial Derivatives Assignment, UM, Malaysia
University | University of Malaysia (UM) |
Subject | SIQ3004: Mathematics of Financial Derivatives |
Assume the risk-free rate of interest is 2% per annum continuously compounded (or any risk-free rate from the market with a brief introduction. If your warrants data are collected from 01 March 2021 until 31 March 2021, then the latest date of your data is defined as 31 March 2021.
- Discuss the moneyness of your call and put warrants based on the latest date of your data.
- If your call and put warrants are now expired at the latest date of your data. In this example, the expiration date was 31 March 2021. Determine the fair value of the call and put warrants.
- Discuss at least 2 trading strategies that involve underlying, call, and put warrants.
- Based on your data. Calculate
a) The daily log return of the underlying asset, i.e
where R𝑡 is the log return at time T₁, and S𝑡 is the underlying price at time T𝑡.
b) Expected annualized return and annualized volatility of the underlying asset.
c) Time to maturity of both call and put options, assuming that the current date is the latest date of your data. In this example, the current date is 31 March 2021. - Now change the current date to a new date (but early than 31 March 2021) such that your time to maturity is an integer multiplied by 7 (1 week). For example, let’s say an option expired on 29 May 2021. The time to maturity was 59 days if it is based on 31 March 2021, but it is not an integer multiplied by 7. The smallest integer number multiple of 7 after 59 days is 63 days. Hence, your NEW current date is 27 March 2021. Let ℎ = 7/365, (1 week), based on the input in (4) and the new current date, determine (for all call and put warrants)
(a) the number of periods for the binomial tree;
(b) the up and down factors, 𝑢𝑢 and 𝑑𝑑, respectively;
(c) the risk-neutral probabilities;
(d) the real probabilities;
(e) the current price of the warrant based on your binomial tree in 5(a);
(f) the true discount rate of the option at the current date;
(g) explain why the observed current option price is different from 5(e). - Determine the theoretical price of the warrants under the Black-Scholes framework.
Get Help By Expert
Score exceptional grades in SIQ3004: Mathematics of Financial Derivatives with Malaysia Assignment Help. Our dedicated team of experts from the University of Malaysia (UM) is here to provide you with unparalleled online assignment assistance. Enjoy our professional 'Do My Assignment' service that guarantees well-researched and accurately solve problems. From complex mathematical calculations to comprehensive derivatives analysis, we have got you covered. Trust our expertise to excel in your assignments and enhance your academic performance.
Recent Solved Questions
- Scott Walker had graduated six weeks ago and his concerted efforts to ensure he wasn’t one of those graduates left on the shelf: Organizing work & Human Resource Case Study, SU, Malaysia
- Select TWO foreign cultures, one from the East and one from the West of the world. Compare and evaluate the differences between: Business Assignment, TU, Malaysia
- Work Integrated Project is a compulsory component of the BBUS program After completing all the taught courses: Final Year Project Case Study, UTM, Malaysia
- ECO7101E: Discuss the macroeconomic statistics of the country. In your opinion, how did the pandemic of COVID-19: Business Economics Assignment, UOP, Malaysia
- MBSA1623: Choose one of the topics in Talent Management in a chosen industry and Identify the key problem in the topic: Leading talent in organization Assignment, UITM, Malaysia
- LGP7084: AHJ is a Malaysian public listed company listed on the Main Market of Bursa Malaysia Securities Berhad: Mergers & Acquisition Assignment, VUC, Malaysia
- FIN70104: How do agency problems impact a firm’s financial and operational decisions? Discuss how agency costs can lead: Financing the Corporation Assignment, TU, Malaysia
- Salma is considering investing in either one of the jewelry companies – Pearl Berhad or Diamond Berhad: Finance Assignment, APU, Malaysia
- Formal and informal communication are rather distinct types of modern workplace communication: Business Communication Essay, UiTM, Malaysia
- The plaintiff and the second defendant were directors and equal shareholders in the first defendant’s company: Company Law Assignment, UM, Malaysia