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larisa [96]
3 years ago
15

Show that Black-Scholes call option hedge ratios also increase as the stock price increases. Consider a 1-year option with exerc

ise price $50, on a stock with annual standard deviation 20%. The T-bill rate is 3% per year. Find N(d1) for stock prices $45, $50, and $55.
Business
1 answer:
Ivan3 years ago
6 0

Answer:

Check explanation.

Explanation:

A call option hedge ratio shows how an option price with respect to price changes in the underlying stock. A call option hedge ratio is used in determining the number of shares of stocks to hedge an option position.

We have Call option with the following characteristics:

X = 50; T=1 year; standard deviation = 20%; T-bill rate = 3%.

Hedge ratio = N(d1) from the Black-Scholes equation

For S=$45, d1 = -0.0268 and N(d1) =0.489309.

For S = $50, d1 = 0.5 and N(d1) = 0.6915.

If S = $55, d1 = 0.97655 and N(d1) = 0.8356.

From the above values obtained, it means that the price of the call option becomes more sensitive to changes in the price of the stock at higher stock prices.

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Strong feeling its Capitalism.
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You are faced with the following alternative choices on Saturday afternoon. You can only do one of these activities. None of the
garri49 [273]

Answer:

Missing out on the benefits I get from working out using exercise equipment in my garage.

Explanation:

When an option is chosen from alternatives, the opportunity cost is the "cost" incurred by not enjoying the benefit associated with the best alternative choice. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen." Since Choice B is the next best choice to hiking, missing out on the benefits of working out will be my opportunity cost.

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2 years ago
Why do project managers have to be aware of organizational culture to help guide a project to success?
natulia [17]

<u>To be able to communicate with </u><u>various departments</u><u> as well as </u><u>external stakeholders.</u>

What are the three ways that organizational culture impacts project management?

Project management can be impacted by organizational culture and project management culture in at least four different ways:

  • Interdepartmental communication,
  • goal-setting by employees,
  • project planning,
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What are the critical success factors for organizational structure and culture in project management?

These include elements of the organization's external environment, human factors, project factors, project work procedures, and project implementation.

Why do project managers have to be aware of organizational culture?

  • Organizational culture has an impact on how employees work together to accomplish common goals.
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  • Focus on simple-to-measure behaviors and actions if you need to change people's attitudes

Learn more about Organizational Culture

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6 0
1 year ago
Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. If the note is dishonored, but Uniform S
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Answer:

Check the explanation

Explanation:

Solution: Journal entry for the purpose would be:

Cash A/c. Dr. 4920

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Interest Receivable 100

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Note:

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= $120

Interest accrued in previous year=$ 120 x 2.5/3 =$ 100

(i.e. represent in entry by way of interest receivable)

Interest income for current period =$(120-100)=$20

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8 0
3 years ago
It is important for a government to have a currency that is easily exchanged in world markets because it:
givi [52]

A country's currency should be easily exchangeable because d. lets you buy and sell goods and services anywhere in the world.

<h3>Importance of international trade </h3>
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Those goods and services need to be able to be purchased regardless of the country one is in. This is why currency needs to be easily exchangeable so as to facilitate this trade.

In conclusion, option D is correct.

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