Q1 Plot Qantas annual historical volatility with 1-year implied volatility in a graph. Using the...
70.2K
Verified Solution
Link Copied!
Question
Finance
Q1 Plot Qantas annual historical volatility with 1-year implied volatility in a graph. Using the Excel data.
Q2 Referring to the graph in Q1, analyse the relationship between historical volatility and implied volatility. Hint: consider volatility cross-over, mean reversion, descriptive statistics etc.
Q3 From your analysis above, develop a delta neutral strategy for the period 10/03/2020 to 25/03/2020 to speculate/arbitrage on volatility. Explain how the strategy will work, and detail all transactions for undertaking the strategy. You can use as much capital as you like, but the cost of capital needs to be considered. Given that the strategy is theoretically risk free, you should not lose any money anyway! You are required to perform at least one re- balancing.
Q4 At the end of the period, close all the positions and evaluate the effectiveness of your strategy.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
