Formulas

Question 1

Number of futures contracts to hedge

Answer 1

Market value of the portfolio X portfolio beta //

(Futures price + dividends) x value of one futures point

Question 2

Theoretical futures

Answer 2

Spot + ir - dividend points

Use spot to work out dividends, not futures

Question 3

Synthetic total returns

Answer 3

Index plus dividends equals futures and money market deposit

Question 4

Put call parity with dividends

Answer 4

Pv(dividend) = spot - pv(strike) - call price + put price

Question 5

Dividend swap payoff

Answer 5

Payout = notional amount x (realized dividends - strike)

Question 6

Risk neutral probability

Answer 6

Cost of spread / max payout

Question 7

Event driven vol

Answer 7

?

Question 8

Variance swap payout

Answer 8

Payout = variance amount x (realised variance - strike^2)

Question 9

Vega amount

Answer 9

Variance amount x 2 x strike

Question 10

Vega swap pnl

Answer 10

Vega notional x (realised variance - strike ^2) /

2 x strike

Question 11

Dollar gamma pnl

Answer 11

Pnl = 1/2 x 100 x dollar gamma x spot return ^2

Question 12

Correlation

Answer 12

Correlation = (index vol / single stock vol)^2

Question 13

Forward variance swap

Answer 13

Fwd vol^2 * fwd time = long vol^2 x long time - short vol^2 x short time