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US PROPERTY AND CASUALTY JOBS

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#241
11-05-2008, 10:04 AM
 rfkwan Member SOA CCA AAA Join Date: Mar 2007 Location: San Francisco, CA Studying for C College: UCSB Alumnus Posts: 62

My mistake. The sum was 504.
#242
11-05-2008, 10:08 AM
 jvaldez84 Member Join Date: Feb 2007 Location: Houston, TX Studying for C College: Texas A&M Alumni Posts: 1,053

Are we saying the answer is not 360?
#243
11-05-2008, 10:09 AM
 stephm115 Member Join Date: Aug 2006 Posts: 35

Quote:
 Originally Posted by yanksrule08 How confident are you that you weren't supposed to use the first month's stock price? Did you read that the calls were bought on the same day of the first listed stock price? The reason I ask is because I didn't pay attention to this, so if you double-checked that the first listed price was the price on the day the calls were bought, I'll have to take your word for it and assume I got this wrong. Edit: if the Asian calls were 1-year calls, it doesn't make sense to use the average of 11 months of prices, does it?
At this point, I'm not confident about specifics of this problem. I am confident that if you purchased the stock on Jan. 1 2008, you would NOT use the stock price on Jan 1. 2008 to calculate the average. You would start with the stock price on Feb. 1 (or Jan. 31). I can't remember what was given. All I know is I added up what I thought was 12 of 13 stock prices and divided by 12. I did it twice and both times got 38.66 (or something like that). It just bums me out that I might have made the same mistake twice when I thought I had double-checked my answer.

I thought the answer was 300 because I didn't think the Asian option produced a payoff because my average price of 38 was lower than the strike of 40.
#244
11-05-2008, 10:13 AM
 The Spocker Guest Posts: n/a

Quote:
 Originally Posted by yanksrule08 She borrowed \$600 at T=0 to pay for her investments. At the time she settled all her positions, she needed to re-pay the lender 600*e^rt, so her profit for this part of the problem was -600(e^rt - 1)
ahh, that's the part i missed. I forgot she borrowed the money.
#245
11-05-2008, 10:17 AM
 The Spocker Guest Posts: n/a

Quote:
 Originally Posted by yanksrule08 She borrowed \$600 at T=0 to pay for her investments. At the time she settled all her positions, she needed to re-pay the lender 600*e^rt, so her profit for this part of the problem was -600(e^rt - 1)
wait, so let me get this straight.

the profit total was 1721 (ish)

she borrowed 600. interest was around \$54. so the answer was like 1067?
#246
11-05-2008, 10:29 AM
 Nonpareil Note Contributor Join Date: Nov 2006 Location: Rocket City Studying for Exam C Posts: 833

Quote:
 Originally Posted by The Spocker how did you apply the interest once you got the 1.09?

Well you had to borrow something like 6,000 to pay for the stocks, the puts, and the calls you purchased. So you mutiply .09XX*6,xxx to get the interest on the loan.
__________________
"One must do no violence to nature, nor model it in conformity to any blindly formed chimera." Janos Bolyai

"Theoria cum praxis." Gottfried von Leibniz
#247
11-05-2008, 10:31 AM
 Nonpareil Note Contributor Join Date: Nov 2006 Location: Rocket City Studying for Exam C Posts: 833

Quote:
 Originally Posted by stephm115 At this point, I'm not confident about specifics of this problem. I am confident that if you purchased the stock on Jan. 1 2008, you would NOT use the stock price on Jan 1. 2008 to calculate the average. You would start with the stock price on Feb. 1 (or Jan. 31). I can't remember what was given. All I know is I added up what I thought was 12 of 13 stock prices and divided by 12. I did it twice and both times got 38.66 (or something like that). It just bums me out that I might have made the same mistake twice when I thought I had double-checked my answer. I thought the answer was 300 because I didn't think the Asian option produced a payoff because my average price of 38 was lower than the strike of 40.

I thought we were given the closing prices for 12 months at the end of each month, so I used the data for all 12 months in the table.
__________________
"One must do no violence to nature, nor model it in conformity to any blindly formed chimera." Janos Bolyai

"Theoria cum praxis." Gottfried von Leibniz
#248
11-05-2008, 10:37 AM
 Need Vacation Member CAS Join Date: Feb 2008 Posts: 589

Quote:
 Originally Posted by christian I thought we were given the closing prices for 12 months at the end of each month, so I used the data for all 12 months in the table.
There was an up-and-in put option with 55 as a barier in the portfolio. I had a payoff 0 for that one because the stock price never reached 55. Any one with me on that one?
#249
11-05-2008, 10:39 AM
 yanksrule08 Member Join Date: Aug 2007 Posts: 65

Quote:
 Originally Posted by The Spocker wait, so let me get this straight. the profit total was 1721 (ish) she borrowed 600. interest was around \$54. so the answer was like 1067?
no, you don't subtract \$654, you only subtract the interest that the 600 earned (54).

Cash flow at time 0: +\$600
Cash flow at time t: -\$600e^rt

Profit: (600-600e^rt) = 600(1 - e^rt) = -600(e^rt - 1)
#250
11-05-2008, 10:43 AM
 The Spocker Guest Posts: n/a

Quote:
 Originally Posted by yanksrule08 no, you don't subtract \$654, you only subtract the interest that the 600 earned (54). Cash flow at time 0: +\$600 Cash flow at time t: -\$600e^rt Profit: (600-600e^rt) = 600(1 - e^rt) = -600(e^rt - 1)
ahh, if your \$600 that is throwing me off. I think christian is right, around 6000 was borrowed (the stock was 40 and I remember 100 shares being purchased, that's 4000 there alone).

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