Fixed Interest and Derivative Securities Analysis

From the database “Share data FINAL.xlsm” choose one company (ASTRAZENECA)

Using the Black Scholes model in the OptAll.xls spreadsheet, and the chosen company, carry out the following:

a) Calculate the volatility of the share price as the standard deviation of the percentage changes over the year 2016.

b) Prepare a table of 1-year call and put option quotes taking the first entry in 2017 (02/01/17) and strike prices that are: at the money (the spot) and 2%, 4% and 10% above and below the spot. Take the risk-free rate as 1%.

c) Prepare a contingency table for an at the money call option using the quote in part (b) with possible maturity prices of spot and 3% and 7% above and below the spot.

d) Construct a collar for a client who wishes to purchase the share on 02/01/17 and have protection from a 4% decrease in the price of the share over 2017.

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