A derivatives dealer has a single transaction with a company which is a long position in a five-year option. The Black-Scholes-Merton value of the option is $6

Suppose that the credit spread on five-year bonds issued by the company is 100 basis points. What is the dealer's CVA per option purchased from the counterparty?
A. $0.19
B. $1.19
C. $0.29
D. $1.29

C

The value of the option when the counterparty's credit risk is taken into account is 6eāˆ’0.01Ɨ5=5.71 and so the CVA is 6āˆ’5.71 or $0.29 per option purchased

Business

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Journalize the following sales transactions for Outdoor Equipment using the periodic inventory system. Explanations are not required

July 1 Sold $4,200 of equipment on account, credit terms are 3/10, n/30, FOB destination July 5 Paid $90 on freight out. July 8 Negotiated a $240 allowance on the goods sold on July 1 July 11 Received payment from the customer for the full amount due on the July 1 sale. What will be an ideal response

Business

A firm may choose to use members of the distribution channel as if they were assembly stations in the factory. Such an approach is known as:

A) backward integration. B) postponement. C) channel assembly. D) deferred delay.

Business