It's after 9, let's discuss!

[rfkwan]

My mistake. The sum was 504.

[jvaldez84]

Are we saying the answer is not 360?

[stephm115]

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.

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.

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?

[Nonpareil]

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.

[Nonpareil]

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.

[Need Vacation]

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?

[yanksrule08]

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)

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).