Use Bloomberg to estimate the prices and the Greeks of the
following stock index options
Note that these are FTSE-100 Index Options and the value of
the index today is assumed to be 6,100. The options should be
priced within the Black & Scholes framework using the
following inputs: rate of interest 1.50%p.a., dividend yield
0.00%, and volatility 4.00% p.a.
State clearly each necessary step requested to compute the
price and the Greeks of the options above.
(b) Write a short report with a critical summary of the results.
Task 2 (40%) (500 words)
Consider the Single Index Model (SIM).
(a) State and comment on all the main assumptions underlying the
SIM.
(b) Use Bloomberg to collect data on 4 stocks. Assume that you
invest an equal amount of your wealth on each stock and build up a
portfolio. Estimate:
. (i) The beta of your portfolio; comment your empirical results
. (ii) The market risk and non-market risk; comment on your
results.
. State all your assumptions and computations.