Question
In: Finance
A bank has sold for $300,000 a European call option on 100,000 shares of a non-dividend...
A bank has sold for $300,000 a European call option on 100,000 shares of a non-dividend paying stockS0 = 49, K = 50, r = 5%, s = 20%, T = 20 weeks, m = 13%The Black-Scholes-Merton value of the option is $240,000 , how do you get to $240,000 ?
Solutions
Expert Solution
Shown below is the method to compute value for option 1 share. As we see below value of call option is 2.40. So value for 100000 shares is 2.40*100000=240000
jeff jeffy answered 2 years agoRelated Solutions
Suppose that a financial institution has sold for $300,000 a European call option on 100,000 shares...
Suppose that a financial institution has sold for $300,000 a
European call option on 100,000 shares of a non-dividend stock.
Assume that the stock price is $49, the strike price is $50, the
risk-free interest rate is 5% per annum, the stock price volatility
is 20% per annum, the time to maturity is 20 weeks (0.3826 years),
and the expected return from the stock is 13% per annum.
(b) (Strategy 1) The financial institution decides to do nothing
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for $49.28 and the standard deviation of their continuously
compounded returns is 22%. The annual riskless rate is 1.75%.
A. Using the Black Scholes model, what is the value of the call
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Peter has just sold a European call option on 10,000 shares of a stock. The exercise...
Peter has just sold a European call option on 10,000 shares of a
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continuously compounded interest rate is 5% per annum; the
volatility is 20% per annum; and the time to maturity is 3
months.
(a) Use the Black-Scholes-Merton model to compute the price of
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(b) Find the value of a European put option with the same
exercise price and expiration as the call...
Peter has just sold a European call option on 10,000 shares of a stock. The exercise...
Peter has just sold a European call option on 10,000 shares of a
stock. The exercise price is $50; the stock price is $50; the
continuously compounded interest rate is 5% per annum; the
volatility is 20% per annum; and the time to maturity is 3
months.
(a) Use the Black-Scholes-Merton model to compute the price of
the European call option.
(b) Find the value of a European put option with the same
exercise price and expiration as the call...
Peter has just sold a European call option on 10,000 shares of a stock. The exercise...
Peter has just sold a European call option on 10,000 shares of a
stock. The exercise price is $50; the stock price is $50; the
continuously compounded interest rate is 5% per annum; the
volatility is 20% per annum; and the time to maturity is 3
months.
(a) Use the Black-Scholes-Merton model to compute the price of
the European call option.
(b) Find the value of a European put option with the same
exercise price and expiration as the call...
The price of a European call option on a non-dividend-paying stock with a strike price of...
The price of a European call option on a non-dividend-paying
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What is the price of a European call option on a non- dividend-paying stock when the...
What is the price of a European call option on a non-
dividend-paying stock when the stock price is $51, the strike price
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volatility is 30% per annum, and the time to maturity is three
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If possible, please provide a detailed step by step...
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using BSM model. work the problem out do not use excel
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