Financial Markets, Securities and Derivatives

Financial Markets, Securities and Derivatives

(a) 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%) (600 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.

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