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MATH 2281 3.0MW (Financial Economics)

Assignments - Winter 2013

Assignments and their solutions will be posted here as they become available.
The grading hours available are limited, so for some assignments, only a
selection of problems will be graded.

Due January 28 in class, or by 5pm in the assignment box.

Solutions are posted on the course
moodle page.

Problems 3, 4, 5 were graded (15 marks each). Handed back Feb 13.
Due February 11 in class (postponed from Feb 8 because York decided to close),
or by 4pm in the assignment box. I have taken the
second problem off the assignment, as it turned out to be more complicated
than I had intended.

Solutions are posted on the course
moodle page.

Problems 3, 4, 5 were graded. Handed back Feb 27.
Due March 8, in class or by 4pm in the assignment box.

Solutions are posted on the course
moodle page.

All assigned problems were graded. Handed back March 22.
### 1st set of practice problems

The following are not to be handed in, but should help in preparing for the midterm.

Solutions are posted on the course
moodle page.
- Hull, problem 14.13;
With the same parameters, now find the price of a European Put, using put-call-parity.
- On the last assignment you built a tree for problem 12.17(a) of Hull. Redo
this problem, also with a 4 month option, and a 2-period tree, a $30 initial
stock price, and 5% interest rates. This time price a call with strike $30,
but now calibrate
to a volatility of 20%. Price the same option by BSM, and compare your answers.
- Assume that a stock has volatility 25%, and current price $97. Assume that risk-free interest rates are 3%. Find the initial price of the following
option positions:
- A 6-month bear spread with strikes $95 and $105
- A 3-month short straddle, with strike $100

Due March 25, in class or by 4pm in the assignment box.

Solutions are posted on the course
moodle page.
Due April 3, in class or by 4pm in the assignment box.
(Note problem 2 should read "Hull problem 12.19")

Solutions are posted on the course
moodle page.

### 2nd set of practice problems

The following are not to be handed in, but should help in preparing for the exam.
- Chapter 18, problem 2
- Chapter 18, problem 3. Calculate the Delta two ways: using our formula, and comparing how the option price changes if the stock price increases by 0.0001
- Chapter 14, problem 8
- Chapter 14, problem 27 [volatility estimate only]

Solutions are posted on the course
moodle page.