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    wasif ahmed
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    The document describes an investment scenario where $10 million can be invested across the AAPL stock or 3 put options (A, B, C). It provides the expected return, variance and cost for each option. The optimal portfolio would minimize risk by allocating 24.4% of funds to Option B and 75.6% to Option C, achieving a weighted return of 0.87% and weighted risk of 0.04%.

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    The document describes an investment scenario where $10 million can be invested across the AAPL stock or 3 put options (A, B, C). It provides the expected return, variance and cost for each option. The optimal portfolio would minimize risk by allocating 24.4% of funds to Option B and 75.6% to Option C, achieving a weighted return of 0.87% and weighted risk of 0.04%.

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    © All Rights Reserved
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    6 views5 pages

    10922

    Uploaded by

    wasif ahmed
    The document describes an investment scenario where $10 million can be invested across the AAPL stock or 3 put options (A, B, C). It provides the expected return, variance and cost for each option. The optimal portfolio would minimize risk by allocating 24.4% of funds to Option B and 75.6% to Option C, achieving a weighted return of 0.87% and weighted risk of 0.04%.

    Copyright:

    © All Rights Reserved
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    of 5

    Total Investment Rs195

    Scenario 1 2 3 4 5 6
    Probability 0.05 0.1 0.2 0.3 0.2 0.1
    AAPL Stock Price Rs235.00 Rs225.00 Rs205.00 Rs185.00 Rs175.00 Rs150.00
    AAPL Stock Return Rs40.00 Rs30.00 Rs10.00 -Rs10.00 -Rs20.00 -Rs45.00
    Return % 20.51% 15.38% 5.13% -5.13% -10.26% -23.08%
    Squared Deviation 6% 4% 1% 0% 0% 4%

    Option A
    Scenario 1 2 3 4 5 6
    Price Rs2.05 Rs2.05 Rs2.05 Rs2.05 Rs2.05 Rs2.05
    Strike Price Rs185 Rs185 Rs185 Rs185 Rs185 Rs185
    Revenue Rs0 Rs0 Rs0 Rs0 Rs10 Rs35
    Profit -Rs2.05 -Rs2.05 -Rs2.05 -Rs2.05 Rs7.95 Rs32.95
    Return % 19.26% 14.18% 4.03% -6.12% -6.12% -6.12%
    Squared Deviation 4% 2% 0% 0% 0% 0%

    Option B
    Scenario 1 2 3 4 5 6
    Price Rs5.1 Rs5.1 Rs5.1 Rs5.1 Rs5.1 Rs5.1
    Strike Price Rs195 Rs195 Rs195 Rs195 Rs195 Rs195
    Revenue Rs0 Rs0 Rs0 Rs10 Rs20 Rs45
    Profit -Rs5.10 -Rs5.10 -Rs5.10 Rs4.90 Rs14.90 Rs39.90
    Return % 17.44% 12.44% 2.45% -2.55% -2.55% -2.55%
    Squared Deviation 3% 1% 0% 0% 0% 0%

    Option C
    Scenario 1 2 3 4 5 6
    Price Rs11.75 Rs11.75 Rs11.75 Rs11.75 Rs11.75 Rs11.75
    Strike Price Rs205 Rs205 Rs205 Rs205 Rs205 Rs205
    Revenue Rs0 Rs0 Rs0 Rs20 Rs30 Rs55
    Profit -Rs11.75 -Rs11.75 -Rs11.75 Rs8.25 Rs18.25 Rs43.25
    Return % 13.66% 8.83% -0.85% -0.85% -0.85% -0.85%
    Squared Deviation 2% 1% 0% 0% 0% 0%

    Security weightage ret. sqrd dev. cost / share


    ratio of shares cost
    AAPL 0% -3.97% 0.23% Rs195 - 0
    Option A 0% -0.79% 0.03% Rs197.05 - 0
    Option B 25% 0.95% 0.00% Rs200.10 1 Rs200.1
    Option C 75% 0.85% 0.00% Rs206.75 3 Rs620.3
    100% 4 Rs820.4
    2
    Problem:
    You have $10m
    7 You can invest in the following 4 places:
    0.05 Mean Return -3.97%
    AAPL Stock worth 195 
    Rs130.00 Vairance 1.72% Put Option A Price: 2.05, Strike Price : 185
    -Rs65.00 Risk (S.D) 13.11% Put Option B Price: 5.1 , Strike Price: 195
    -33.33% Cost Rs195 Put Option C Price: 11.75, Strike Price: 205
    9% Your goal is to minimize risk using the entire budget
    optimal portfolio?

    7
    Rs2.05 Mean Return -0.79%
    Rs185 Vairance 0.66%
    Rs55 Risk (S.D) 8.10%
    Rs52.95 Cost Rs197.05
    -6.12%
    0%

    7
    Rs5.1 Mean Return 0.95%
    Rs195 Vairance 0.35%
    Rs65 Risk (S.D) 5.93%
    Rs59.90 Cost Rs200.10
    -2.55%
    0%

    7
    Rs11.75 Mean Return 0.85%
    Rs205 Vairance 0.17%
    Rs75 Risk (S.D) 4.13%
    Rs63.25 Cost Rs206.75
    -0.85%
    0%

    Total Investment Rs10,000,000


    ratio of cost total cost
    0 Rs - Weighted Return 0.87%
    0 Rs - Weighted Vairance 0.00%
    0.24392 Rs 2,500,000.00 Weighted Risk 0.04%
    0.75608 Rs 7,500,000.00
    1.00 Rs 10,000,000.00
    Color Scheme ConstraintsObjective Changing Variable
    ollowing 4 places:

     
    05, Strike Price : 185
    1 , Strike Price: 195
    .75, Strike Price: 205

    ze risk using the entire budget. What is the

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