THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 411
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CHAPTER 14
Risk Management with Financial Derivatives
379
WEB EXERCISES
1. Visit the Montreal Exchange s website at www.
m-x.ca. Under Trading Tools, click on the
Options Calculator. Use the calculator to price an
American equity option maturing in 60 days with a
strike price of $80, on a non-dividend paying stock,
with a current price of $90, annual volatility of 15%,
and risk free annual interest rate of 3% on the 90-day
period.
2. Visit the Montreal Exchange s website (as above).
Under Trading Tools, click on the ONX Simulator.
Use the simulator to compute the probability of an
upcoming Bank of Canada rate move as reflected in
the ONX futures price.
3. We have discussed various stock markets in detail
throughout this text. Another market that is less
well known is the TSX Venture Exchange. Here con-
tracts on a wide variety of commodities are traded on
a daily basis. Go to www.tmx.com to find some
information about the origin and purpose of this
exchange. Write a one-page summary discussing the
information you obtained.
4. We leave the details of pricing option contracts to
another course. However, the following site can be
used to demonstrate how the features of an option
affect the option s prices. Go to www.intrepid.com/
~robertl/option-pricer4.html. Indicate what happens to the price of an option under each of the
following situations:
a. The strike price increases.
b. Interest rates increase.
c. Volatility increases.
d. The time until the option matures increases.
Be sure to visit the MyEconLab website at www.myeconlab.com.This online
homework and tutorial system puts you in control of your own learning with
study and practice tools directly correlated to this chapter content.
On the MyEconLab website you will find the following mini-case for this chapter:
Mini-Case 14.1: Micro Hedge, Macro Hedge, Managing Interest Rate Risk, and Duration
