THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 411

CHAPTER 14 Risk Management with Financial Derivatives 379 WEB EXERCISES Visit the Montreal Exchange s website at www m-x.ca Under Trading Tools, click on the Options Calculator Use the calculator to price an American equity option maturing in 60 days with a strike price of $80, on a non-dividend paying stock, with a current price of $90, annual volatility of 15%, and risk free annual interest rate of 3% on the 90-day period Visit the Montreal Exchange s website (as above) Under Trading Tools, click on the ONX Simulator Use the simulator to compute the probability of an upcoming Bank of Canada rate move as reflected in the ONX futures price We have discussed various stock markets in detail throughout this text Another market that is less well known is the TSX Venture Exchange Here con- tracts on a wide variety of commodities are traded on a daily basis Go to www.tmx.com to find some information about the origin and purpose of this exchange Write a one-page summary discussing the information you obtained We leave the details of pricing option contracts to another course However, the following site can be used to demonstrate how the features of an option affect the option s prices Go to www.intrepid.com/ ~robertl/option-pricer4.html Indicate what happens to the price of an option under each of the following situations: a The strike price increases b Interest rates increase c Volatility increases d The time until the option matures increases Be sure to visit the MyEconLab website at www.myeconlab.com.This online homework and tutorial system puts you in control of your own learning with study and practice tools directly correlated to this chapter content On the MyEconLab website you will find the following mini-case for this chapter: Mini-Case 14.1: Micro Hedge, Macro Hedge, Managing Interest Rate Risk, and Duration