5) Trading with Portfolios

Question 1

What is a Portfolio

Answer 1

The combination of financial contracts
that an investor holds

Question 2

What is a Hedge

Answer 2

Something investors do to reduce their risk

Question 3

What is a Straddle Portfolio

Answer 3

Buying both a call option and a put option, with the same strike price E and the same expiry date T, at the same time

Question 4

What is a Short Straddle Portfolio

Answer 4

If you sell the same two options as a normal straddle

Question 5

What is the expected profit for a portfolio

Answer 5

Question 6

What is the Expected return for a portfolio

Answer 6

Question 7

What is a Bull Spread Portfolio

Answer 7

Create it by buying a call and then selling one with a slightly higher exercise price

Question 8

What is a Bear Spread Portfolio

Answer 8

Question 9

What is the formula for a Bond

Answer 9

A contract that pays a known amount F, called the face value (or redemption value), at a known time T called the maturity date

Question 10

What is Face Value

Answer 10

The final payment of a bond

Question 11

What is a Coupon

Answer 11

Payments from the seller of the bond to the buyer

Question 12

What is a Zero-Coupon Bond

Answer 12

A bond that does not pay any coupons

Question 13

What is the return of a risk-free bond

Answer 13

Question 14

What is the Discount Factor of a Bond

Answer 14