TU Wien:Financial Management and Reporting VU (Aussenegg)/Exam 2 (2021S)

1. A call option can be replicated via a portfolio consisting of ... . a. one put option long b. one unit of the underlying long c. one zero bond short (face value = strike price) d. one unit of the underlying short e. zero bond long (face value = strike price)

2. A call option on OMV (price of OMV: €40) has the following characteristics: (i) a strike price of €40, (ii) a riskless interest rate of 0.0% p.a. (continuously compounded), (iii) a time to maturity of 6 months, and (iv) a volatility of OMV returns of 40% p.a. Specify the moneyness of the option. Thus, the call option is .. . a. in-the money b. at-the-money c. out-of-the money

3. Options are ... . a. conditional forward transactions b. unconditional forward transactions

4. A call option has been bought at €5 (strike price = €20). At maturity the underlying has a price of €35. The percentage profit of the call option purchase is ... . a. 200% b. -100% c. 0% d. 10% e. 100%

5. An investor buys one call option with a strike price of €10 for a price of €1 and in addition buys one put option with a strike of €8 for a price of €1. Both options have the same underlying and the same expiry date. At which price of the underlying is the lower breakeven point of this option portfolio? a. 4 b. 5 c. 6 d. 7 e. 8 f. 9 g. 10 h. 11 i. 12 j. 13 k. 14 l. 15

6. Use a 1-step Cox/Ross/Rubinstein (1979) binomial model to value a call option on Siemens (current price of Siemens: €130) with a strike price of €120, a riskless interest rate of 0.0% p.a. (continuously compounded), a time to maturity of 0.5 years, and a volatility of Siemens returns of 35% p.a. The company is going to pay no dividends in the next 6 months. (a) The Cox/Ross/Rubinstein binomial model call option value is (using 3 decimal places (like 3.123); please insert just a number without the "€" sign): (4 points) Provide also the interim results of your option value calculation for the following parameters: (b) Up-step u for the underlying (use 4 decimal places, like 1.1234): (1 point) (c) Value of the underlying in the up-step (use 3 decimal places, like 20.123): (1 point) (d) Value of the call option in the up-step (use 3 decimal places, like 10.123): (1 point) (e) Pseudo-probability p for an increase in the price of the underlying (us 4 decimal places, like 0.1234): (1 point)

7. An investor buys one call option with a strike price of €40 for a price of €5 and in addition buys one put option with a strike of €35 for a price of €4. Both options have the same underlying and the same expiry date. At which price or between which prices is the loss of the option portfolio highest at maturity? Specify below the difference between these prices. In case there is just one price, then select zero. a. 0 b. 1 c. 2 d. 3 e. 4 f. 5 g. 6 h. 7 i. 8 j. 9 k. 10 l. 11 m. 12 n. 13 o. 14

8. A longer time to maturity ... . a. decreases the value of American put options b. increases the value of American call options c. increases the value of European call options d. decreases the value of European put options

9. An investor buys one call option with a strike price of €10 for a price of €1 and in addition buys one put option with a strike of €8 for a price of €1. Both options have the same underlying and the same expiry date. The option portfolio equals a ... . a. Protective Put b. Straddle short c. Straddle long d. Strange short e. Strangle long

10. A higher volatility of the underlying ... . a. increases the value of American call options b. decreases the value of American put options c. increases the value of European call options d. decreases the value of European put options

11. European options can be exercised ... . a. only on the expiration date b. at any time up to the expiration date

12. The price of European put option with a maturity of 1 year is €20 (strike price = €100), the underlying has a price of €90, and the 1-year discount factor (continuously compounded) is 0.99. Calculate the arbitrage free price of a European call option (same underlying, same maturity, same strike price as the put option). Insert your answer in € (without the €-Sign) and with 2 decimal places (like 7.24).

13. The owner of an underlying (price = €100) has sold in the past a call option for €5 (strike price = €90). The value of the portfolio (call short plus underlying), considering the cash inflow of selling the call, is then ... . a. €95 b. €105 c. €100 d. €85

14. An investor buys one call option with a strike price of €10 for a price of €1 and in addition buys one put option with a strike of €8 for a price of €1. Both options have the same underlying and the same expiry date. At which price or between which prices is the loss of the option portfolio highest at maturity? Specify the difference between these prices. In case there is just one price, then select zero. a. 0 b. 1 c. 2 d. 3 e. 4 f. 5 g. 6 h. 7 i. 8

15. A put option has been bought at €2 (strike price = €20). At maturity the underlying has a price of €17. The percentage profit is ... . a. -100% b. 30% c. 50% d. 0% e. 100%