Question
In: Finance
Consider a European option on a non-dividend-paying stock when the stock price is $30, the exercise...
Consider a European option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, continuously compounded risk-free interest rate is 5%, volatility is 25% per annum, and time to maturity is 4 months (assume 4 months equals 120 days).
- Find the value of a call option at the strike price of $29 using the Black-Scholes option pricing model. Show all steps.
- Find the value of a put option at the strike price of $29 using the Black-Scholes option pricing model. Show all steps.
- Show that put-call parity holds using the put and the call at the strike price of $29. (you need to find the value of both sides of the put-call parity for this.)
Solutions
jeff jeffy answered 10 months agoRelated Solutions
Consider a European option on a non-dividend-paying stock when the stock price is $30, the exercise...
Consider a European option on a non-dividend-paying stock when
the stock price is $30, the exercise price is $29, continuously
compounded risk-free interest rate is 5%, volatility is 25% per
annum, and time to maturity is 4 months (assume 4 months equals 120
days).
- Find the value of a call option at strike price of $29 using
the Black-Scholes option pricing model. Show all steps using
Excel.
- Find the value of a put option at strike price of...
Consider a European option on a non-dividend-paying stock when the stock price is $30, the exercise...
Consider a European option on a non-dividend-paying stock when
the stock price is $30, the exercise price is $29, continuously
compounded risk-free interest rate is 5%, volatility is 25% per
annum, and time to maturity is 4 months (assume 4 months equals 120
days).
a. Find values of Delta for the two options.
b. Using just delta, what should be the change in the price of
the call option if the price of the underlying stock increases by
$0.04?
d....
) Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise...
) Consider an option on a non-dividend-paying stock when the
stock price is $30, the exercise price is $28, the risk-free
interest rate is 5% per annum, the volatility is 30% per annum, and
the time to maturity is four months.
(a) What is the price of the option if it is a European
call?
(b) What is the price of the option if it is an American
call?
(c) What is the price of the option if it is...
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price...
Consider an option on a non-dividend-paying stock when the stock
price is $30, the exercise price is $29, the risk-free interest
rate is 5% per annum, the volatility is 25% per annum, and the time
to maturity is four months.
1. What is the price of the option if
it is a European call?
2. What is the price of the option if
it is an American call?
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price...
Consider an option on a non-dividend-paying stock when the stock
price is $30, the exercise price is $29, the risk-free interest
rate is 5% per annum, the volatility is 25% per annum, and the time
to maturity is four months.
What is the price of the option if it is a European call?
What is the price of the option if it is an American call?
What is the price of the option if it is a European put?
Verify...
Consider a put option on a non-dividend-paying stock when the stock price is $30, the exercise...
Consider a put option on a
non-dividend-paying stock when the stock price is $30, the exercise
price is $29, the risk-free rate is 5%, the volatility is 25% per
annum, and the time to maturity is four months.
Use a 2-period binomial model to price this same option.
Use Black-Scholes formula to value this option
How much the European call option on this stock with the same
strike (E) and time to maturity (T) will cost?
How much the American...
Consider a put option on a non-dividend-paying stock when the stock price is $30, the exercise...
Consider a put option on a
non-dividend-paying stock when the stock price is $30, the exercise
price is $29, the risk-free rate is 5%, the volatility is 25% per
annum, and the time to maturity is four months.
Use a 2-period binomial model to price this same option.
Use Black-Scholes formula to value this option
How much the European call option on this stock with the same
strike (E) and time to maturity (T) will cost?
How much the American...
Consider a put option on a non-dividend-paying stock when the stock price is $30, the exercise...
Consider a put option on a
non-dividend-paying stock when the stock price is $30, the exercise
price is $29, the risk-free rate is 5%, the volatility is 25% per
annum, and the time to maturity is four months.
Use a 2-period binomial model to price this same option.
Use Black-Scholes formula to value this option
How much the European call option on this stock with the same
strike (E) and time to maturity (T) will cost?
How much the American...
Consider an option on a dividend-paying stock when the stock price is $30, the exercise price...
Consider an option on a dividend-paying stock when the stock
price is $30, the exercise price is $29, the risk-free interest
rate is 5% per annum, the volatility is 25% per annum, and the time
to maturity is four months. The present value of the dividend to be
paid in 3 months is $1. (20 points) a. What is the price of the
option if it is a European call? b. What is the price of the option
if it...
Consider an option on a dividend-paying stock when the stock price is $30, the exercise price...
Consider an option on a dividend-paying stock when the stock
price is $30, the exercise price is $29, the risk-free interest
rate is 5% per annum, the volatility is 25% per annum, and the time
to maturity is four months. The present value of the dividend to be
paid in 3 months is $1. (20 points) a. What is the price of the
option if it is a European call? b. What is the price of the option
if it...
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