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Question
For a utility function that exhibits decreasing martingale utility, the martingale utility is high when:A) Consumption and utility are low
B) Consumption and utility are high
C) Consumption is low and utility is high
D) Consumption is high and utility is low
Answer
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Related questions
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Assume the following: LN(S) and LN(Q) have a correlation coefficient of -0.65, S(0) = 55, Q(0) = 60, r = 0.04, σs = 0.22 σQ = 0.15, and dividends = 0. Using formula 20.39, what is the price of a claim that pays Q/?
A) $8.16
B) $9.16
C) $10.16
D) $11.16
Q:
Assume the following: LN(S) and LN(Q) have a correlation coefficient of 0.40, S(0) = 60, Q(0) = 60, r = 0.05, σs = 0.30 σQ = 0.25, and dividend = 0. Using formula 20.39, what is the price of a claim that pays ?
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A stock owned by a portfolio has a bankruptcy probability of 1% per year. Using a Poisson distribution, what is the probability that this firm will not declare bankruptcy over the upcoming 10 years?
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Monte Carlo simulation assumes all assets earn:
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A) $349
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Q:
The current price of silver is $32.00 per ounce. The effective lease rate and risk free rate are 3.0% and 4.0%, respectively. If the cost to mine one ounce of silver is a constant $25.00, what is the trigger price per ounce at which the silver will be mined?
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Q:
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The current Nikkei index price is 21,200. Assume σ = 0.13, r = 0.05 and div = 0.015. If
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Q:
The Buckingham Casino offers to give every gambler one share of Buckingham Casino Corp. stock if the price drops below $40.00, as an incentive to spur business. If S = $45.25, σ = 0.15,
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Briefly define a terminal boundary condition.
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A) $6.55
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Q:
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When hedging a foreign currency position, what makes a down-and-out put unattractive?
Q:
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A) $1.34
B) $1.36
C) $1.38
D) $1.40
Q:
What is the total dollar cost to create a delta hedge position against a 200 short call position? Assume calls are priced at $4.16, the delta is 0.7644, and stock price is $73.00.
A) $9,880
B) $10,328
C) $11,168
D) $12,660
Q:
What actions are required to both delta-hedge and gamma-hedge a written option position?