Define the following terms relating to option contracs
21. Define the following terms relating to option contracs:
Delta
Gamma
Theta
Vega
Rho
22. Which of the following is not a derivative instrument?
(a) Contract to sell corn
(b) Option agreement to buy land
(c) Installment sales agreement
(d) Mortgage backed security
23. All of the following are financially engineered products, except:
(a) Mortgage
(b) Mortgage backed security
(c) Interest only
(d) Principal only
24. What is the cost of 100 shares of Jiffy, Inc. stock given that the bid-ask prices are $31.25 - $32.00 and a $15.00 commission per transaction exists?
(a) $3215
(b) $3140
(c) $3125
(d) $3200
25. The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. What is the profit or loss to a short position if the spot price of the market index rises to $920 by the expiration date?
(a) $20 gain
(b) $20 loss
(c) $10 gain
(d) $10 loss
Hint
21.Delta is changing the price of the option per unit change in the price of the underlying asset.Gama is defined as change in delta Based on the Per unit price change in the underlying asset.Theta is defined as change in the price of the option per unit change in time to expiration.Vega is defined as change in the price of the option per unit change in the implied volatility of the optionRho ...
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