衍生工具和风险管理-im14.docVIP

CHAPTER 14: ADVANCED DERIVATIVES AND STRATEGIES END-OF-CHAPTER QUESTIONS AND PROBLEMS 1. Insuring a portfolio using stock and puts is the ideal approach. You simply buy the appropriate put and hold the position until the put expiration. The put will protect against a drop in the price below the exercise price. An equivalent result can be achieved by replicating the put through dynamic trading of stock index futures. This type of transaction will work, however, only if the stock price changes are small and the position is revised often. Thus, it is easier to do the transaction with a put – no adjustments to the position are needed. In practice, however, puts are seldom available with the terms and conditions needed or the puts that are available are not sufficiently liquid. 2. Most structured notes are tailored, i.e., structured, to the specific needs of an investor. A portfolio manager whose portfolio is exposed to loss from falling interest rates over the holding period might purchase an inverse floating rate note as a type of hedge. If interest rates decrease, the inverse floater will gain, thereby offsetting some or all of the loss on the rest of the portfolio. Of course, the inverse floater will lose if rates rise thereby offsetting some or all of the gain on the rest of the portfolio. 3. The payoffs at expiration from the chooser are as follows: Payoff of Chooser at Expiration Choice made at t ST ( X ST X designate chooser as a call 0 ST - X designate chooser as put X - ST 0 The holder of the chooser option will designate it as a call at time t if C(St,T-t,X) P(St,T-t,X). From put-call parity, the put price can be expressed as C(St,T-t,X) - St + X(1 + r)-(T-t). Thus, C(St,T-t,X) P(St,T-t,X) implies that C(St,T-t,X) C(St,T-t,X) - St + X(1 + r)-(T-t), which implies that St X(1 + r)-(T-t). We are told that to replicate the chooser we hold a call expiring at T with exercise price X and a put expiring at t with exercise price