Derivatives Harvard Case Solution & Analysis

Derivatives Case Solution

Introduction

This report attempts to perform an analysis of the options of six listed companies in United Kingdom. The six stocks that have been chosen and on whose stock prices, call and put options have also been written are the stocks of Abbot laboratories, Unilever, Unisys Corp, British Tobacco Company, Barclays Bank and the Sears Holding Company.

A detailed analysis has been performed in the light of the options pricing theory and the range of the statistical tests such as the runs test, serial correlation or the auto correlation test and the normality tests have been applied in SPSS to analyze the theory behind options. Moreover, the valuations of the options and their implied volatilities have also been computed as shown in the excel spreadsheet using the Derivagem options pricing software in excel. Finally, based upon the complete findings of the assignment, a conclusion has also been drawn.

Historical Stock Prices & Stock Returns

First of all, the data for all the six stocks and the market which in this case is the FTSE 100 index had been extracted from Yahoo Finance website. The daily, weekly and the monthly stock prices for each of the stocks have been extracted and then based upon these historical prices, the daily, weekly and the monthly returns have been calculated for all the six stocks and the FTSE100 index. The formula which has been applied in order to create the return series for each of the stocks for daily, weekly and monthly time frames is as follows:......................

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