Question
In: Finance
As a financial analyst at JPMorgan Chase investments, you are evaluating European call options and put...
As a financial analyst at JPMorgan Chase investments, you are evaluating European call options and put options using Black Scholes model. Suppose BMI’s stock price is currently $75. The stock’s standard deviation is 7.0% per month. The option with exercise price of $75 matures in three months. The risk-free interest rate is 0.8% per month. Please answer the following questions.
Please choose all correct answers.
| 1. |
The price of the European call option is $13.14 |
|
| 2. |
The price of the six month European call option is $3.76 |
|
| 3. |
The risk free interest rate per year is 11.8% |
|
| 4. |
The call option will increase by 20 cents if the stock goes up by $1. |
|
| 5. |
The standard deviation per year is 24.25% |
|
| 6. |
The risk free interest rate per year is 1% |
|
| 7. |
The standard deviation per year is 16% |
|
| 8. |
The standard deviation per year is 84%. |
|
| 9. |
The risk free interest rate per year 9.6% |
|
| 10. |
The call option will decrease 60 cents if the stock goes up by $1. |
|
| 11. |
The standard deviation per year is 70%. |
|
| 12. |
The call options delta is 0.6015 |
|
| 13. |
The price of the European call option is $4.5062 |
|
| 14. |
The price of the call option is $3.50 |
|
| 15. |
The risk free interest rate per year is 8% |
Solutions
Expert Solution
As per the Black Scholes Call Option Calculations :-
Correct answers are: 5,12 and 13 are correct.
jeff jeffy answered 3 years agoRelated Solutions
Suppose that JPMorgan Chase sells call options on $1.55 million worth of a stock portfolio with...
Suppose that JPMorgan Chase sells call options on $1.55 million
worth of a stock portfolio with beta = 1.90. The option delta is
.75. It wishes to hedge out its resultant exposure to a market
advance by buying a market-index portfolio. Suppose it uses market
index puts to hedge its exposure. Each put option is on 100 units
of the index, and the index at current prices represents $1,000
worth of stock.
a.
How many dollars’ worth of the market-index...
As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option...
As an analyst at Bank of America Merrill Lynch, you are
evaluating European call futures option and European put futures
options. A futures price is currently $50. It is expected to move
either to $55 or down to $45 over the next three month. The
risk-free interest rate is 8% per annum with continuous
compounding.
As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option...
As an analyst at Bank of America Merrill Lynch, you are
evaluating European call futures option and European put futures
options. A futures price is currently $50. It is expected to move
either to $55 or down to $45 over the next three month. The
risk-free interest rate is 8% per annum with continuous
compounding.
a. What is the probability of an up movement in a
risk-neutral world? (sample answer: 35.0%)
b. What is the value of a three-month call option with a...
As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option...
As an analyst at Bank of America
Merrill Lynch, you are evaluating European call futures option and
European put futures options. A futures price is currently $50. It
is expected to move either to $55 or down to $45 over the next
three months. The risk-free interest rate is 8% per annum with
continuous compounding.
a. What is the probability of an up movement in a
risk-neutral world?
(sample answer: 35.0%)
b. What is the value of a three-month call option with...
European call and put options with a strike price of $50 will expire in one year....
European call and put options with a strike price of $50 will
expire in one year. The underlying stock is selling for $51
currently and pays no cash dividend during the 1life of the
options. The risk-free rate is 5% (continuous compounding). The
price of the call option is $5.00. Please answer the following
questions:
1. Please calculate the price of the put option under the
put-call parity
2. If the actual price of the put is $2.50, is there...
-European call and put options with 3 months of expiration exist with strike price $30 on...
-European call and put options with 3 months of expiration exist
with strike price $30 on the same underlying stock. The call is
priced at $3.5, the put is priced at $1.25, while the underlying is
currently selling for $28.5.
a) What is the net profit for the buyer of the call if the stock
price at expiration is $36?
b) What is the net profit for the seller of the call if the
stock price at expiration is $38?...
Consider the PHLX 111 Jun EUR European call and put options with the exercise price of...
Consider the PHLX 111 Jun EUR European call and put options with
the exercise price of 111 cents per EUR. The call premium is 1.83
cents per EUR. The put premium is 0.66 cents per EUR. The current
exchange rate is 112.01 cents per EUR. Calculate the intrinsic
value and the time value of the call and put options.
ABC stock is being traded at $115 today. Consider European put and call options with an...
ABC stock is being traded at $115 today. Consider European put
and call options with an exercise price of $110. The option expires
in 91 days and the volatility is 0.50. The risk-free rate
(continuously compounded) is 2.5%. Use actual/365 day count
method.
A) Calculate the values of the put and call options. Assume
there will be no dividend before the option expires.
B) Calculate the values of the put and call options, but assume
now the continously compounded dividend...
Find the limit of the Black-Scholes values of plain vanilla European call and put options as...
Find the limit of the Black-Scholes values of plain vanilla
European call and put options as T → 0 and as T → ∞. You may assume
q = 0.
Consider the Black-Scholes formula for prices of European call and put options with strike K each,...
Consider the Black-Scholes formula for prices of European call
and put options with strike K each, maturity T each on a
non-dividend-paying stock with price S and volatility σ, with
risk-free rate r. The formulas are written in terms of quantities
d1 and d2 used to calculate the probabilities normal distribution.
If the volatility of the stock becomes large and approaches
infinity,
(a) what values do d1 and d2 approach?
(b) what value does the call price approach?
(c) what...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Which notion from below best explains people's decision-making process from an economic perspective? People's behavior reflects...
- 1)The histone proteins of nucelosomes are often abnormally modified in cancer cells, leading to _____. a....
- The files provided contain syntax and/or logic errors. In each case, determine and fix the problem,...
- I need an analysis and a complete description of the physics of the mass and magnet...
- C++, Write an Exception Class for the Student class you created in the initial project you...
- IS-LM-BP Model (Open Economy) Question 2 Goods Market C = Co + cYD YD = Y-...
- Suppose an inflationary economy can be described by the following equations representing the goods and money...
ADVERTISEMENT