Derivatives Project, Coke Cola Co.

The company selected was Coca-Cola. Throughout this entire project, I realized how stable and protected this company is towards to the overall market and industry.

First off, I gathered data and imported that into excel. I was then able to answer number 1.

Mean Daily Return | Daily Volatility | Annualized Volatility |

0.00019319 | 0.999% | 16% |

*The following tables are the answers for C-H for number 1

Input Values |

Days going up | 120 |

Total Days | 249 |

| |

Crude Probability going up | 0.4819 |

Crude Probability going down | 0.5181 |

Upper (U) Level | 1.0100 |

Down (D) Level | 0.9901 |

P | 0.6604 |

1-P | 0.3396 |

| |

* After my calculations, I predicted the stock price for Monday, December 9, 2013. The first table shows the price using the Risk Neutral Method.

Risk Neutral Method |   |   |   |

Days | Possible Stock Price | Corresponding Probabilities | Price * Probability |

0 | 0 | 0 | 0 |

1 | 42.1337 | 0.1256 | 5.2911 |

2 | 41.2999 | 0.3229 | 13.3372 |

3 | 40.4826 | 0.3322 | 13.4476 |

4 | 39.6814 | 0.1708 | 6.7795 |

5 | 38.8962 | 0.0439 | 1.7089 |

6 | 38.1264 | 0.0006 | 0.0216 |

| | | |

| | Forecasted Price | $40.59 |

The table below also predicts the stock price for December 9, 2013. Only this time I am using crude probabilities. This is the actual times the stock went up divided by the total trading days.

Crude Probability Approach |   |   |

Days | Possible Stock Price | Corresponding Probabilities | Price * Probability |

0 | 0 | 0 | 0 |

1 | 42.1337 | 0.0260 | 1.0953 |

2 | 41.2999 | 0.1397 | 5.7708 |

3 | 40.4826 | 0.3004 | 12.1617 |

4 | 39.6814 | 0.3229 | 12.8151 |

5 | 38.8962 | 0.1736 | 6.7518 |

6 | 38.1264 | 0.0373 | 1.4229 |

| | | |

| | Forecasted Price | $40.02 |

Using the crude probability approach, it shows that the stock would go down. As of December 9, the stock was up. But on December 10, the stock closed at $39.85. Which may indicate...