Would you complain about this exam?
Guys, you did enough. Go home get some rest! And don't worry: it is an open book exam so in case there is something you don't know - you have three hours to learn it. Good Luck! God bless youu
Hell no. There is no such thing as enough!
someone answer?
Are zero rates and swaps exam relevant?
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Just asking... as they were never on the exam before.
More seriously, swaps or not ?
Does anyone have the solutions for the 2015 first sit exam?
Does anyone have a solution for the binomial model with the knock out barrier ? (exam 2014)
Hey, do you know if the course coordinator considered last year exam as fair in terms of difficulty? And if the difficulty level might be maintained that high this year?
Any suggested solutions for this?
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also, the solutions to the case are from a different exam..
Did you find a solution ?
What is the answer to this question?
Here, I will upload a detailed solution of the entire exam later
Hey sorry, is it the procedure for someone watning to mimic a long forward ?
Can someone put his/her solutions for the first sit of 2015? Would be very nice!! (screenshots)
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How do you do 1a)iv) and 1b)iii)-v)?
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But are you sure you can use formula 12.10 for this NON-recombining tree? I think you have to calculate the value of the option backwards at each node
Can someone put his/her answer for question 1) i??? Would be very nice!
Any more exams available?
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the actual price of the barrier option should be 0 right, it never pays off because the barrier is exactly at the strike??
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For 1 ai) do you have to use risk neutral or real world probabilities? since in question iii asks if it differs using risk neutral perspective
Solutions exam 2015 first sit?
Does anyone know the answer to 1a i)?
why do we get a different value of p if we use formula 12.6 from the hull book? p = (e^rt-d)/u-d --> we get 0.64 if we use this formula but they give us a value of 0.8 for p here. Why?
they give us" real world probability" of 0.8. The formula in the book is for the "risk neutral probability"
For the people who'll go to the inspection. Could you keep us posted , especially good for all the next year students. From the little bits we can reconstruct the exam. Maybe this will bring more clarification for the next gen...
For what I can still remember is that: Q1: Asks about replication/ How to hedge (u and d given) -Perform a hedge of the underlying future you calculated Q2: A Deutsche bank case of an investment product, which pays 100 if it is below 100, 100- 120 as it follows the stock index and 120 if the stock index is above 120. (Long put at strike 100 + Short call at 120) then you have to replicate the same thing at the AEX (Dutch index) and talk about the things you had in the last years part 2 exams. Q3: Calculate implied volatility given a formula -Perform a delta hedge What are the shortfalls of using a delta hedge only (transaction costs etc.) What alternative could you do (Hedging with the greeks, just adjust daily/weekly etc. instead of with every move of the stock (Dynamic hedging) Hedge gamma neutral BUT you can only choose a strike price which is not equal to 100 (Used for delta) and you have to calculate the price and implied volatility using the given implied volatility formula This is all assuming constant volatility Now what would you have to do if you want to hedge and volatility is not constant --> Vega hedge To perform a vega hedge you would need a third option (Different strike price) and go through the procedure again with calculating the price and implied volatility. Make sure you know how to calculate the derivate of N'(d1) and N'(d2)
Corrected IV Formula for Q3 Q3: -If the formula correctly predicts the IV why is that interesting for a trader?
Anyone got anything right in the exam?
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How do you do 3a) in general?
For a) i) B is negative (See volatile smile on equity, it's a decreasing function of the strike price, so as K increase, sigma decreases which means it's coefficient is negative. Compute the sigma IV with that formula and use that in ii) to compute the price with BS for every option and henceforth for the price of the portfolio. not sure about iii. , iv. is in the book (hedging continuously is costly, etc....)
I think there is a mistake. 4/12 = 0.333. I think instead of 0.333 it should be 5/12 = 0.416
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How to do 3a i?
this is a mistake, right?
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yes i get that, but the 1297.64 is supposed to be the option payoff for the up up state, but looking at the payout function this is 27
Oh yeah, it seems like he just copied the solution of the 2013 exam, where the payoff is from a power option. So yeah you're right
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This is something similar what the tutor showed last year (although we did not finish it). As for pricing you could argue for either binomial or BS but you would need to mention the required inputs. And some bulls** a la, BS price and binomial are pretty similar a bit of volatility smile etc. However, as I said we did not finish it and the tutor mentioned that most people simply draw a graph.
Here is how you are supposed to come up with the solution. I am not quite certain about each step in detail
The solution of the case in the 2014 exam is identical to the solution of the case in the 2013 exam.... would the same solution generally apply to both?
Anyone has the solution to the 2014 and 2015 exam cases?
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someone has solutions for this task?
Check you email, we don't have to study chapter 6 & 7!
What does "u" represent in the implied volatility formula given in question 3 (a) (i) in the 2015 exam?
I just assumed that it is the error term, so did not incorporate it, but I have no clue if this is correct.
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The case is wrong, but to get to the solution is a little bit more complicated and the tutor won't publish the "official solution". If you have a correct solution it would be nice if you share.
a = 1.105 (T=2) p = 0.763 Thus, p in the solution is completely off Am I missing something?
p=(1.05-0.8)/(1.2-0.8)=0.625 The trick here is to "assume discrete compounding", it is a little bit strange but this is how to solve it
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Does someone has done it with the "june" options? I was not sure how to do it and just used the available things
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Great thank you! And why do you multiply by 20000 for the payoff of the log contract?
This is from Case 4 the log contract, which has a payoff of 20,000 * ln(FT/ST)
Is it possible that a "K" is missing here?
Question 18.16. I am not sure how to calculate the value at time t=2. The upstate has a payoff of 0.035441 and the downstate 0.118818. p= 0.5726 ;t = 1 and steps =3 --> delta t= 1/3 and r=6 % (r foreign =3% but not needed in this case). Normally I would have to calculate (0.5726*0.035441+(1-0.5726)*0.118818)*e^(-6%*1/3) = 0.069669,while the solution should be 0.0783332. What is my mistake?
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Hey! why is the r foreign not needed in discounting the (pSoU+(1-p)SoD), but it is used for calculating a?
It is not needed for discounting, because you can either invest in the product (in this case the Forex option) or put the money in your home country in a risk-free account. However, if you invest in the Forex Option you have to calculate exsactly how much money you will get. Interest rate differentials affect the price. E.g. if you have an exchange rate which is 1:1 and have the same interest rates, then in 1 year if there is no appreciation/depreciation it should be as well 1:1. However, if you have interest rate differentials the (covered/uncovered) interest rate parity will affect the relation. If one country pays 0% interest while the other pays 100%, the no-arbitrage condition should still hold which means that the one which pays 100% interest will loose 50% in value next year.
For the less mathematically blessed among us (me). Wouldn't you usually multiply both sides by the S0. Furthermore, the 40% shift is also not obvious. Would greatly appreciate if you could explain it or point me to the obvious thing I am missing.
40% *max(0;X) is the same as max(0;40%X) because 0*40% = 0%. It gives the same payoff
Lastly, how is it possible to get rid of that? I mean the mathematical way. Kind regards and thank you. If you happen to know and kind enough to explain it.
To make it easier lets say the e^- stuff is X for the first half and Y for the second half, so the function is 0.4A * 1/s0 *(s0*X - S0*Y) . If you would write it out it would be 0.4*(1/s0 *s0 *x - 1/s0 *s0*Y) And since s0/s0 = 1 we can get rid of it and end up with 0.4*(X-Y)
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At Short 350 (e.g. J27) Why is it +$H$11 instead of -$H$11 in the second part of the function? In the first part of the function it is -$H$11 *$E$17 as well. You will still receive the price of the short call no matter if the buyer exercise it later or not???
In the first part they multiply minus number of short# by minus cost of option, thus getting a positive number profit. In the second part they probably counted that the payoff at sufficiently high S will be negative anyway and only multiply by -# to display it. And also cause it wrong. For example at S355. As naked short seller you would have to buy it in the market and sell it at K. (-355+350+13.75)*189= 1658. You still should receive some profit since (S-K)
Let S=355, K=350, C=15 and #=-1 At (S-K+C)*-# = -20 At (-S+K+C)*# = 10 page 198 chapter 9.2 mechanics of options similar -max(S-K,0); (355-350;0) --> - max(5;0)
You can find most information regarding the Bitcoin Future here:http://www.cmegroup.com/education/bitcoin/cme-bitcoin-futures-frequently-asked-questions.html
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Hi Anton, the file has a invalid PDF structure. Could you try to upload it again? Would be great! Cheers!
Somehow it only works on the old studydrive, here is the link: <a href="https://nostalgic.studydrive.net/courses/maastricht-university/options-and-futures/other/fundamentals-of-futures-and-options-markets-2008-prentice-hall-8th-edition/viewfile/414905" target="_blank">https://nostalgic.studydrive.net/courses/maastricht-university/options-and-futures/other/fundamentals-of-futures-and-options-markets-2008-prentice-hall-8th-edition/viewfile/414905</a>
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this is a wrong file. Use the one above this one
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Seems that not all tasks are in here