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F=S*e^(rt)
Stock Prices
a. Above 1600
b. 801-1600
c. 401-800
d. 201-400
e. 101-200
f. 51-100
g. 25-50
h. Less than 25
Lot Size
125
250
500
1000
2000
4000
8000
10000
h= hedge ratio,
=coefficient of correlation
s= standard deviation of underlying
asset
f= standard deviation of commodity use
for hedging
S>K
S=K
S<K
S= Spot Price
K= Strike Price
K>S
S=K
S>K
Premium
Highest
Lowest
With no dividend(S-K)<=(C-P)<=(S-K*e^(-r*t))
With dividend
(S-K-D)<=(C-P)<=(S-K*e^(-r*t))
Stocks are tends to follow lognormal
distribution, % age change in stock
prices over the shorter period of time
are normally distributed
LIBOR
Fixed Rate of
12%
Rs50,00,00,000.00 Notional Principle
A is the fixed rate receiver and
variable rate payer.
B is the variable rate receiver and
An agreement to pay 1% on a
Japanese Yen principal of
1,040,000,000 and receive 5% on a
US dollar principal of $10,000,000
every year for 3 years.
At initiation
A
$10,000,000
Party A
1,040,000,000
Party B
Party A
$500,000
Party B
10,400,000
At maturity:
$10,000,000
Party A
Party B
1,040,000,000
6-month
time
0.0
0.5
1.0
1.5
2.0
2.5
3.0
LIBOR
5.50%
5.25%
5.50%
6.00%
6.20%
----
Fixed rate
Floating rate
Payment
Payment
$10MM
1,040MM
5.2MM
$275,000
5.2MM
$262,5001
5.2MM
$275,000
5.2MM
$300,000
6.44% 5.2MM
$310,000
5.2MM
$322,000
1,040MM
$10MM
Thank
You