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 6e−0.01×5=5.71 and so the CVA is 6−5.71 or $0.29 per option purchased
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A restriction/appropriation of retained earnings
a. decreases total assets b. increases total retained earnings c. decreases total retained earnings d. has no effect on total retained earnings
The following set of items describes activities completed by a company in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. A single employee in the mailroom opens the mail, counts the money received, and prepares a control list of the amount received
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Answer the following statement true (T) or false (F)
When granting the claim when the customer is at fault, what should be included in the body of the letter?
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