Consider a Portfolio Which Uses an European Index as the Underlying

question 6

Multiple Choice

Consider a portfolio which uses an European index as the underlying asset.The pay offs of the underlying asset in the up node and down node is 1,390 and 1,330 respectively.If the risk-free rate is 3.5% and the pay-offs of structured bond in the up node and down nodes are €214.50 and €169.50 respectively.Find the value of the derivative assuming no-arbitrage.

• A)€214.00
• B)€169.50
• C)€220.00
• D)€250.50

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Definitions:

Persistence

The ability of a substance to remain in the environment for a long time without breaking down.

Chemical Nature

The inherent characteristics, composition, and properties of a substance or material at the atomic or molecular level.

Concentration

Concentration refers to the measure of the amount of a given substance within a specified volume or unit of another substance.

Tragedy of the Commons

A situation in which individual users of a shared resource act independently according to their own self-interest and deplete or spoil that resource through their collective action.