finance 30233-81, fall 2010 name m. j. neeley school of ...sbufaculty.tcu.edu/mann/fin 30233 -...

Finance 30233-81, Fall 2010 Name________________________ M. J. Neeley School of Business, TCU S. Mann Assignment 09, November 17, 2010 Due Date: December 8, 2010 , beginning of class. Simulation of Currency Prices 1. Create 1000 simulated price series for one year for the Euro, using the techniques of Assignment 8, and using information from the Vanilla Euro Call Bloomberg Screen from 11/16/10 (attached, along with a profit/loss chart). 2. Create 1000 simulated price series for one year for the Yen, using the techniques of Assignment 8, and using information from the Vanilla Yen Call Bloomberg Screen from 11/16/10 (attached, along with a profit/loss chart). Give the drift (mu) some thought. Hint: The expected one-year forward exchange rate should be the one-year forward rate. Monte Carlo Valuation 3. Use Monte Carlo valuation to estimate prices for the following currency options: a. Ordinary (vanilla) one-year Calls on €1,000,000 (1 million Euros) with the following strike prices: i. $1.32/Euro; ii. $1.341/Euro; iii. $1.36/Euro. b. Ordinary (vanilla) one-year Calls on ¥100,000,000 (100 million Yen) with the following strike prices: i. ¥ 84.00/dollar; ii. ¥ 82.96/dollar; iii. ¥ 83.00/dollar VBA Valuation using Garman-Kohlhagen 4. Create VBA code for the Garman-Kohlhagen model, and use the Garman-Kohlhagen model to value the six options above (in part 3), using the data from the Bloomberg screens. VBA Valuation using Black 5. Create VBA code for the Black Futures/Forward model, and use the Black Futures/Forward model to value the six options above (in part 3), using the data from the Bloomberg screens.

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Page 1: Finance 30233-81, Fall 2010 Name M. J. Neeley School of ...sbufaculty.tcu.edu/mann/Fin 30233 - F2010/fin30233...Finance 30233-81, Fall 2010 Name_____ M. J. Neeley School of Business,

1. Create 1000 simulated price series for one year for the Euro, using the techniques of Assignment 8, and using information from the Vanilla Euro Call Bloomberg Screen from 11/16/10 (attached, along with a profit/loss chart).

2. Create 1000 simulated price series for one year for the Yen, using the techniques of Assignment 8, and using information from the Vanilla Yen Call Bloomberg Screen from 11/16/10 (attached, along with a profit/loss chart).

Give the drift (mu) some thought. Hint: The expected one-year forward exchange rate should be the one-year forward rate.

Monte Carlo Valuation

3. Use Monte Carlo valuation to estimate prices for the following currency options: a. Ordinary (vanilla) one-year Calls on €1,000,000 (1 million Euros) with the

following strike prices: i. $1.32/Euro;

ii. $1.341/Euro; iii. $1.36/Euro.

b. Ordinary (vanilla) one-year Calls on ¥100,000,000 (100 million Yen) with the following strike prices:

i. ¥ 84.00/dollar; ii. ¥ 82.96/dollar;

iii. ¥ 83.00/dollar VBA Valuation using Garman-Kohlhagen

4. Create VBA code for the Garman-Kohlhagen model, and use the Garman-Kohlhagen model to value the six options above (in part 3), using the data from the Bloomberg screens.

VBA Valuation using Black

5. Create VBA code for the Black Futures/Forward model, and use the Black Futures/Forward model to value the six options above (in part 3), using the data from the Bloomberg screens.