even my answer was butterfly spread since according to me the question specified trader expected limited volatility therefor strangle or straddle doesn't make sense
I remember the question said price is expected to go 40% under price 1 or 40% above price 2. I consider these 2 prices as 2 strikes. I consider also 40% is a substantial move. That's why I chose strangle.
I remember the question said price is expected to go 40% under price 1 or 40% above price 2. I consider these 2 prices as 2 strikes. I consider also 40% is a substantial move. That's why I chose strangle.
Yip, maximise profit for 40% move up or down and minimise losses if it stayed in 20% range or something along those lines. I chose butterfly spread but strangle is the correct answer.
I remember the question said price is expected to go 40% under price 1 or 40% above price 2. I consider these 2 prices as 2 strikes. I consider also 40% is a substantial move. That's why I chose strangle.
Why should a future Index have a risk neutral prob of one ? The risk neutral Probability is a change in the Probability measure such that you can discount the expected option value with the risk free rate and is derived from the up and down factor..
Why should a future Index have a risk neutral prob of one ? The risk neutral Probability is a change in the Probability measure such that you are able to discount the expected option value with the risk free rate and is derived from the up and down factor..
Was the binomial question related to a future but not stock?
The risk neutral probability up should that case equal to (1 - D)/(U - D).
I was trapped by the stress alhough I know it.
This exam was really tricky.
Was the binomial question related to a future but not stock?
The risk neutral probability up should that case equal to (1 - D)/(U - D).
I was trapped by the stress alhough I know it.
This exam was really tricky.
Was the binomial question related to a future but not stock?
The risk neutral probability up should that case equal to (1 - D)/(U - D).
I was trapped by the stress alhough I know it.
This exam was really tricky.
In the swcheser notes : « The binomial model can also incorporate the unique characteristics of options on futures. Since futures contracts are costless to enter into, they are considered, in a risk-neutral setting, to be zero growth instruments. To account for this characteristic, ert is simply replaced with a 1. »
As I remember it asked the disadvantages of ccp, especially when a party has the less incentive to monitor the risk of another party because of the ccp taking the risk. I answered moral hazard
As I remember it asked the disadvantages of ccp, especially when a party has the less incentive to monitor the risk of another party because of the ccp taking the risk. I answered moral hazard
As I remember it asked the disadvantages of ccp, especially when a party has the less incentive to monitor the risk of another party because of the ccp taking the risk. I answered moral hazard
In the swcheser notes : « The binomial model can also incorporate the unique characteristics of options on futures. Since futures contracts are costless to enter into, they are considered, in a risk-neutral setting, to be zero growth instruments. To account for this characteristic, ert is simply replaced with a 1. »
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