Working Paper 283
Bob Jensen at Trinity University
CapIT Corporation Exhibit 1
Reproduced from Page C19 of the Wall Street Journal, June 17, 1999
EURODOLLAR CME Interest Rate Options
$ Million; pts. of 100%; LIBOR = 5.18% on June 17
Strike |
Calls-Settle |
Calls-Settle |
Calls
Settle |
Puts-Settle |
Puts--Settle |
Puts--Settle |
9425 | 3.30 |
0.10 |
0.20 |
0.25 |
||
9450 | 1.00 |
1.25 |
1.45 |
0.40 |
0.65 |
0.85 |
9475 | 0.10 |
0.25 |
0.40 |
2.00 |
2.30 |
|
9500 | 0.00 |
0.05 |
0.10 |
4.40 |
4.45 |
|
9525 | 0.00 |
6.90 |
||||
9550 | 0.00 |
9.40 |
Est. vol. 96,655 Tuesday (June 16, 1999) vol.
80,343 calls; 34,949 puts
Op. Int. Tuesday (June 16, 1999) 1,465.850 calls; 851,528 puts
Hypothetical data on option values in future dates after June 17, 1999
The first few questions below refer to Exhibit 1. Be careful of the way Exhibit 1 uses annualized (APR) rates. The LIBOR and strike prices are based upon annual APRs. The premiums are also annualized rates. Thus the LIBOR on June 17 is a 5.18% APR corresponding to a 9,482 basis point spot rate. The strike price corresponding to the 9450 basis points strike price is a 5.50% strike rate. Suppose the cap is perfectly effective under SFAS 133 rules.
Assume the following ex post option spot rates and premiums on an option with a 9,450 (or 5.50%) strike price:
put optionSpot LIBOR is a 5.18% APR on June 17 with a premium of 0.85% for a September put option
Spot LIBOR is a 5.18% APR on June 17 with a premium of 1.45% for a September call optionSpot LIBOR is a 5.10% APR on June 30 with a premium of 0.55% for a September
Spot LIBOR is a 5.38% APR on July 31 with a premium of 0.97% for a September
put optionSpot LIBOR is a 6.13% APR on Aug. 31 with a premium of 0.89% for a September
put optionSpot LIBOR is a 6.50% APR on September 17.