Mfin5541

FINS5535 Group Project

Question 1

(a)The implied volatility of the European put is 0.265615979.

(b)The implied volatility of the American put is 0.256632979.

(c)American put can settle early. However, the European put can only settle at the maturity date.

Question 2

(a) Using the formula Ri= Ln(Si-). For example, the first scenario of cell H3 is R2 calculated   by =Ln(1458.4/1455)=0.002334.[pic 1]

The historical volatility is 0.15274275.

(b)The maximum volatility over the period is 0.543259.

  The minimum volatility over the period is 0.0527298.

    The average volatility over the period is 0.13912522.

  (c)

     [pic 2]

Question 3

(a)

[pic 3]

In the column of Future settlement prices, the data is using the newspaper’s Interest rate futures & options of 30-day interbank cash rate futures from August 2015 to May 2016 and 90 day bank accepted bills future of June 2016. The continuously compound rate is calculated in the blue color.

(b)

[pic 4]

The spot price is 5172.8 on 26th August 2015 which is the most recently date from the S&P ASX200-AXJO-2015 spreadsheet. The future settle price is using the newspaper data of Equity futures & options SPI 200(A$ x SPI200) Futures (AP). The recalculate data of dividend yield is show in the the blue color.

(c) There is a big difference between the two different estimations of the dividend yield. The dividend yields only calculated based on the futures price is within the range of (0.017995,0.01971). However, the continuously compounded dividend yield calculated in part b is in the range of (0.0486698,0.167259) which is greater than the dividend yield of only based on futures prices.

Question 4

15 stands for the year of 2015. 16 stands for the year of 2016.

(a)

[pic 5]

The risk free rate is 0.019934=1.9934% on August which is from the spreadsheet of Interest Rates & SPI Futures. The strike price and market price are used from the newspaper data of SPI 200(A$25 x SPI200) Put Option(AP) of four December 2015. The stock price comes from the data of S&P ASX 200-AXJO-2015.

(b)

[pic 6]

Sigma is calculated by Solver in the spreadsheet of Puts&Dvd. In this spreadsheet, the market price is equal to the settlement price of newspaper SPI 200(A$25 x SPI200) Put Option(AP) of December 2015.

(c) 

[pic 7]

According to the graph, there is a positive relationship between volatility and strike price. Thus,  if sigma increse, the strick price will also increase.

(d)

[pic 8]

The risk free rate is 1.9934% on August which is from the spreadsheet of Interest Rates & SPI Futures. The strike price and market price are used from the newspaper data of SPI 200(A$25 x SPI200) Put Option(AP) of three March 2016. The stock price comes from the data of S&P ASX 200-AXJO-2015.