Task 1
(a) Use Bloomberg to estimate the prices and the Greeks of the following stock index
options Note that these are DJIA Index Options and the value of the index today is assumed to
be 10,400. The options should be priced within a Black & Scholes framework using the
following inputs: rate of interest 1.00%p.a., dividend yield 0.00%, and volatility 6.00%
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
Consider the Capital Asset Models (CAPM).
(a) Describe and critically asses the CAPM?
(b) Use Bloomberg to collect data on 4 stocks from the FTSE 100 index. Assume that you
invest an equal amount of your wealth on each stock and build up a portfolio. Assume no
dividends Estimate:
(i) The beta of your portfolio; comment your empirical results
(ii) The market risk and non-market risk; comment on your results.
(iii) The covariace matrix; comment on your results
