# Study Session 17: Derivatives

## Option's pricing - anomaly?

Hello everyone :)

I have a question with regard to the option pricing - not really a CFA I level topic but I hope someone will help me to understand the issue.

Lets assume situation below (which has actually happened in the past):

Current spot exchange-rate for TRY/EUR = 6.8. Below we have following put options and its prices:

- 1-day PUT 8.80 (premium of 2.00 TRY for every EUR)

- 1-month PUT 8.80  (premium of 1.87 TRY for each EUR)

- 12-month PUT 8.80 (premium 0.80 TRY for every EUR)

## Derivatives Replication

Hello.
Can someone give a numerical example regarding replication of derivatives?

Thanks.

## Put-Call Parity question

I understand that when the put-call parity equation is rearranged to be p = c - S + X/(1+r)T, this means long put = long call, short asset, long bond.  My question is regarding the “short asset”.  Does shorting the asset in this equation mean that the analyst take either of these 2 positions to short the asset?…

1. Selling a call option (short the position and short the asset)
2. Buying a put option (long the position and short the asset)

## Payoffs in Futures

Is it true that value of futures don’t consider present value of profit unlike forwards. I mean do the mark to market payouts consider time value?

Thanks for contributions

## Arbitrage - I got the answer but could I prove with math from dat?

The question is below.  I get the answer given the concept of arbitrage, but how would I prove this out mathematically from the data easily?

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An analyst determines that a portfolio with a 35% weight in Investment P and a 65% weight in Investment Q will have a standard deviation of returns equal to zero.

## Future Contracts

(1) Is a future contract American or European by nature?

(2) Can a future converge to the spot price even before expiry?

(3) Can a future contract be sold before expiry?

## The Nature of a Future Contract

(1) Is a future contract American or European by nature?

(2) Can a future converge to the spot price even before expiry?

(3) Can a future contract be sold before expiry?

## Future contracts

I want to ask about future contracts.How the profit is calculated and the position is closed?.suppose I entered in a contract worth \$100(agreed price) delivery:after two months.The inital margin is 20% which is \$20.Lets say price of contracts rises to \$120 and now i want to lock that profit what can I do and if I sold that contract to someone what amount will he pay me?

## Bull spread with European vs American call options

There’s something I really can’t crack since a couple days ago and I was wondering if you could help me with this.

I read in a finance dissertation the following:

## Derivatives, Am I right?

Is it correct?

Call

• no cash flows: Pa=Pe
• cash flows: Pa>Pe

Put

• no cash flows:Pa>Pe
• cash flows:Pa>Pe

Pa-price of american option Pe- price of european o