1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Alenkinab [10]
4 years ago
13

34. Consider a binary (digital) option on a stock currently trading at $100. The option pays a $1 if the stock price goes below

$100 three months from now. The annualized standard deviation of the stock is 20%, and the risk-free rate is 0%. Suppose you sold a 100 of these binary options. How many shares of the underlying stock you need to long/short to achieve a delta-neutral position
Business
1 answer:
Vladimir [108]4 years ago
3 0

Answer:

48

Explanation:

N(d2): probability of call option being exercised

So current stock price = 100

K strike price = 100

r risk free rate = 0% = 0.05

s: standard deviation = 20%

t: time to maturity = 3month = 0.25 year

di – In(So/K) + (r +0.5 * 5%) ** S*t0.5

d1 = 0.05

d2 = dl - 5*10.5

d2 = -0.05

N(d2) = normsdist(d2) = 0.48

Pay-off per option = 1

No. of options sold = 100

Expected pay-off = -0.48*1*100 = -48

Therefore go long on 48 shares so that if stock price becomes 101, pay-off from stocks = 48*(101-100) = 48

You might be interested in
Write a short paragraph describing the benefits of working as a team to complete a project.
Kobotan [32]

Answer:

A group of people who have to achieve common goal is known as team. If we work in team it increases our creativity and learning, it also builds trust. It boost the particular person when we work in team. We can also learn faster. There are more chances of getting success in particular area if we work in team. As there is saying, " together we can achieve more what each of us can achieve." It also enhances productivity and capability.

4 0
3 years ago
Read 2 more answers
Relational integrity constraints enforce business rules vital to an organization's success and often require more insight and kn
Over [174]

Answer: False

Explanation: Each company has integrity constraints unique to its business and every databases in a business contain integrity constraints that help prevent chaotic and unwanted events from happening. Business critical integrity constraints enforce business rules that are vital towards organization's goals and success and more often require more insight and in-depth knowledge than relational integrity constraints which are rules that enforce the basic and fundamental information essential to any database.

7 0
3 years ago
John and Karl can live together in a two-bedroom apartment for $500 per month, or each can rent a single-bedroom apartment for $
tester [92]

Explanation:

A: Together their flat is $500, however if they were to live separately it'd be $350 per month. 350x2= 700. They save $200 by sharing a flat. However, if Karl plays John $175 a month to keep the dirty dishes away, then 200>175. Therefore, they should live together.

Karl could just live alone and pay the $350 to live alone with no dish problem.  Since Karl will play $175 to rid the dish problem the highest rent he'll pay is 350-175=175. John would pay 500-175=325<350 this shows it better for John to live with Karl.

B: If living alone, John would pay £ 350. The highest monthly rent he would be willing to pay for the shared apartment is: £ 350- £ 30 = £ 320. This means that Karl would need to pay at least: £ 500- £ 320 = £ 180. But the highest monthly rent Karl would be willing to pay is : £ 175. They should live separately.

hope this helps you out a bit, I know its a lot. But its math, what do we expect. lol

6 0
4 years ago
what type of marketing strategy best exemplifies a straightforward mapping of a product to a customer’s willingness to pay?
Zarrin [17]

Vertical differentiation strategy is the marketing strategy that best exemplifies the straightforward mapping of the product.

Marketing strategy refers to plans executed by a firms' marketing department which ensure that various plan for reaching prospective consumers and turning them into customers of the products are achieved.

Basically, the differentiation strategy in marketing entails development of product which is unique, different and distinct from its competitors product.

But in this question context, the type of marketing is Vertical differentiation strategy.

The Vertical differentiation strategy involves a firm finding a quality and price mix which will differentiate the brand from its competitors,

Therefore, the type of strategy that best exemplifies a straightforward mapping of a product to a customer’s willingness to pay is the Vertical differentiation strategy.

Learn more about Vertical differentiation strategy here

<em>brainly.com/question/14482663</em>

6 0
3 years ago
The cyclically adjusted budget deficit is the deficit in the federal​ government's budget​ if: A. there were an amendment requir
andreyandreev [35.5K]

Answer:

B. the economy were at potential GDP.

A cyclically adjusted deficit is a budget deficit caused by a slowing economy rather than fiscal policies such as increasing discretionary spending or decreasing the tax rates.

Explanation:

The cyclically adjusted budget deficit or surplus is the deficit or surplus in the federal government budget if the economy were at potential GDP. The federal budget deficit is the year-to-year shortfall in tax revenues relative to government spending (T < G+TR), financed through government bonds.

A budget deficit implies lower taxes and increased Government spending (G), this will increase AD and this may cause higher real GDP and inflation. For example, in 2009, the UK lowered VAT in an effort to boost consumer spending, hit by the great recession.

6 0
3 years ago
Read 2 more answers
Other questions:
  • If a 30% change in the price of grape soda leads to a 45% change in quantity demanded, then what is the price elasticity of dema
    5·1 answer
  • Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: Direct materials $
    8·2 answers
  • 3) Cost tracing is ________. A) the assignment of direct costs to the chosen cost object B) a function of cost allocation C) the
    9·1 answer
  • Identifying problems, alternatives and resources are all examples of the transferable skill of?
    10·1 answer
  • Discuss ONE of the components of job analysis.​
    11·1 answer
  • he auditors have some uncertainties, but these uncertainties are not so material that they cannot form an opinion on the fairnes
    7·1 answer
  • 12. The Keystone Company has two divisions, A and B. Assume the following data for the two divisions for March: Division A Divis
    6·1 answer
  • The Paint Supply Store franchise sells an average of 52 gallons of Yellow Paint every week (for 52 weeks per year, Standard Devi
    13·1 answer
  • Question 27 pts OSHA, the Occupational Safety and Health Administration, has notified you that your company is legally required
    8·1 answer
  • a t-bill with face value $10,000 and 81 days to maturity is selling at a bank discount ask yield of 2.8%. required: a. what is t
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!