1. A bond portfolio manager wants to reduce the average duration of his portfolio consisting of fixed-rate government securities without selling any security. He will most likely: A. buy fixed-rate government bond futures. B. sell corporate bonds. C. execute a pay-fixed interest rate swap. 2. You have the following information related to a covered call position: stock… Read More


1. A non-dividend paying stock is trading at €100. A European call option on this stock has two years to mature. The periodically compounded risk-free interest rate is 3%, the exercise price of the option is €100. The up factor is 1.25, and the down factor is 0.80. The risk-neutral probability of an up move is… Read More