1a. The impliued volatility is obtained by finding the standard deviation that,

Question

1a.          The impliued volatility is obtained by finding the standard deviation that, when used in the Black-Scoles-Merton model, makes the

a.     model price expires at zero

b.     model price equals the market price of the option

c.     model price such that it exceeds currently traded narket option values

d.     moel price equal the intrinsic value of the underlying stock

e.     none of the above

1b.          An interest rate swap with both sides paying a floating rate is called a

a.     plain vanilla swap                   b.     two-way swap                     c.     floating swap

c.     spread swap                              e.     basis swap

1c.          Find the upcoming net payment in a plain vanilla interest rate swap in which the fixed party pays 10 percent and the floating rate for the upcoming payment is 9.5 percent. The notional amount is $20 million and payments are based on the assumption of 180 days in the payment period and 360 days in a year.

a.     fixed payer pays $1,950,000                b.     fixed payer pays $950.000                    c.     floating payer pays $1 million                d.            floating payer pays $50,000                          e.     fixed payer pays $50,000          

Explanation / Answer

1a.          The impliued volatility is obtained by finding the standard deviation that, when used in the Black-Scoles-Merton model, makes the

d.     model price equal the intrinsic value of the underlying stock

1b.          An interest rate swap with both sides paying a floating rate is called a

c.     spread swap

1c. uncertain about the result obtained, sorry

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