Use black scholes model For questions 5 and 6, assume the spot exchange rate for euros...

Use black scholes model

For questions 5 and 6, assume the spot exchange rate for euros is 1.0949 (that is $1.0949 will purchase €1). If the risk free interest rate for US dollars is 1.451%, the risk free interest rate for euro area is -0.250% and the standard deviation of changes in the exchange rate is 0.1126. 5a. What is the price of a 3-month call option on euros with a strike price of 1.0965? b. What is the price of a 3-month call option on euros with a strike price of 1.0985?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

ANSWER 1 : 0.02613

ANSWER 2 : 0.02513

I HAVE ROUNDED TO 2 DECIMALS AS NOTHING WAS MENTIONED.

PART 2

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

assume the spot exchange rate for euros is 1.0949 (that is $1.0949 will purchase €1). If...

assume the spot exchange rate for euros is 1.0949 (that is $1.0949 will purchase €1). If the risk free interest rate for US dollars is 1.451%, the risk free interest rate for euro area is -0.250% and the standard deviation of changes in the exchange rate is 0.1126. 6a. What is the price of a 3-month put option on euros with a strike price of 1.1965? b. What is the price of a 3-month put option on euros with a...

Black-Scholes-Merton model: Using a spot price of $96 and strike price of $98, a risk-free rate...

Black-Scholes-Merton model: Using a spot price of $96 and strike price of $98, a risk-free rate of return of 6% and the fact that the volatility of the share price is 18%, answer following questions: What is the price of an eight-month European call? [1 mark] What is the price of an eight-month American call? [1 mark] What is the price of an eight-month European put? [1 mark] How would your result from k. change if a dividend of $1...

Use black scholes model 9a. Calculate the value of a 6-month binary call option on the...

Use black scholes model 9a. Calculate the value of a 6-month binary call option on the asset that has a strike price of 75. b. Calculate the value of a 6-month binary put option on the asset that has a strike price of 75. assume the current spot price of the underlying assets is 77.50, its cash yield is 0.45%, its standard deviation is 0.725, and the risk free interest rates is 2.0%.

The following information applies to the next two questions. Use the Black-Scholes Option Pricing Model for...

The following information applies to the next two questions. Use the Black-Scholes Option Pricing Model for the following option. Stock price S0 = $70; Time to Maturity T = 6 months; Risk free rate r = 10% annually; Standard deviation STD = 50% per year. No dividends will be paid before option expires. 10. What is the value of d1 in the Black-Scholes model for a call option with a striking price of $70 on the above stock? a....

Use the Black-Scholes model to find the price for a call option with the following inputs:...

Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $30, (2) strike price is $36, (3) time to expiration is 6 months, (4) annualized risk-free rate is 7%, and (5) variance of stock return is 0.16. Do not round intermediate calculations. Round your answer to the nearest cent.

3. Use the Black-Scholes model to find the price for a call option with the following...

3. Use the Black-Scholes model to find the price for a call option with the following inputs: 1) current stock price is $30, 2) Strike price is 32, 3) Time expiration is 4 months, 4) annualized risk-free rate is 5%, and 5) standard deviation of stock return is 0.25.

Use the Black-Scholes model to find the value for a European put option that has an...

Use the Black-Scholes model to find the value for a European put option that has an exercise price of $62.00 and four months to expiration. The underlying stock is selling for $63.50 currently and pays an annual dividend of $2.07. The standard deviation of the stock’s returns is 0.24 and risk-free interest rate is 5.5%. (Round intermediary calculations to 4 decimal places. Round your final answer to 2 decimal places.)

Use the Black-Scholes model to estimate the price of a call option. Here are the input....

Use the Black-Scholes model to estimate the price of a call option. Here are the input. S = £40, E = £35, t = 6 month, Rf = 8% = 0.08, σ = std = 0.31557. b) What is the price of a put option? c) ABB call and put options with an exercise price of £17 expire in 4 months and sell for £2.07 and £2.03, respectively. If the equity is currently priced at £17.03, what is the annual...

Use the Black-Scholes model to find the value for a European put option that has an...

Use the Black-Scholes model to find the value for a European put option that has an exercise price of $62.00 and four months to expiration. The underlying stock is selling for $64.50 currently and pays an annual dividend of $1.62. The standard deviation of the stock’s returns is 0.16 and risk-free interest rate is 4.0%. (Round intermediary calculations to 4 decimal places. Round your final answer to 2 decimal places.) Put value $ ???

Use the Black-Scholes model to find the price for a call option with the following inputs:...

Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $45, (2) exercise price is $50, (3) time to expiration is 3 months, (4) annualized risk-free rate is 3%, and (5) variance of stock return is 0.50. AND based on the information above, find the value of a put with a $50 exercise price. (SHOW CALCULATIONS PLEASE)

Subjects