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An analyst used the BSM model to estimate N(d1) as $0.6. Given that the price of the underlying stock increases by $0.50, calculate the approximate change in the price of the call option.
-$0.2
-$0.3
+$0.2
+$0.3
An analyst used the BSM model to estimate N(d1) as $0.6. Given that the price of the underlying stock increases by $0.50, calculate the approximate change in the price of the put option.
-$0.2
-$0.3
+$0.2
+$0.3
A 3X5 swaption is –
a swaption that expires in 3 years and the underlying swap matures 5 years after that.
a swaption that expires in 3 years and the underlying swap matures 2 years after that.
a swaption that expires in 2 years and the underlying swap matures 5 years after that.
a swaption that expires in 2 years and the underlying swap matures 3 years after that.
Answer:
1. The approximate change in the value of the call option-
+$0.3
The value of the call option will be calculated by multiplying the
current stock price with the N(d1). It represents the future value
of the underlying asset
2. The approximate change in the value of the put option- -$0.3
3. A 3X5 swaption is – a swaption that expires in 3
years and the underlying swap matures 2 years after
that.
A swap option means the option to swap. It is written and
interpreted as FRA. A 3X5 swaption means that the the
oprion will mature in 3 years and give the right to the holder
enter into a swap for a period of 2 years. (2 years has been
calculated as 5-3 years)
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