Assignment 1 :Introduction to Financial Engineering and Risk Management (Introduction to Financial Engineering and Risk Management) Answers 2025

Question 1 – Forward price of silver

Theoretical forward price (rounded to nearest integer):

✅ 221

Question 2 – European call option (binomial model)

Option value (rounded to two decimals):

✅ 1.53

Question 3 – Minimum-variance hedging

Minimum-variance hedge (number of orange juice futures contracts):

✅ 105,000

Question 4 – Risk-neutral pricing paradox

Correct option:

✅ P₀ does not change.

Question 5 – Replicating strategy price

European call option price at N0,0N_{0,0}N0,0​ (rounded to one decimal):

✅ 0.9

Final Answer Summary