Current stock price is $150; volatilityis 20% per annum. An at-the-money American put option on the...

Current stock price is $150; volatilityis 20% per annum. An at-the-money American put option on the stock expires in 3 months. Risk free rate is 5% per annum, continuously compounded. There is no dividend expected over the next 3 months. Use a 3-step CRR modelto price this option.

Expert Solution

Solution:

The Price of the option is $5.695. Below is the Excel screenshot of formula used.

Note: Give it a thumbs up if it helps! Thanks in advance!

jeff jeffy answered 1 year ago

Current stock price is $150; volatility is 20% per annum. An at-the-money European put option on...

Current stock price is $150; volatility is 20% per annum. An at-the-money European put option on the stock expires in 3 months. Risk free rate is 5% per annum, continuously compounded. There is no dividend expected over the next 3 months. Use a 3-step CRR model to price this option.

A put option on a stock expires in 7 months with a strike price of 150....

A put option on a stock expires in 7 months with a strike price of 150. The interest rate is 5 percent and the standard deviation of the stock is 25 percent. Graph the value of this put option as the price of the stock goes from 130 to 170.

Use a 2-step binomial tree to price an american style put option when the current stock...

Use a 2-step binomial tree to price an american style put option when the current stock price is $50 and the stock price will move up or down by 20 percent at each time(that is, the ending stock price are $72,$48, and $32). The strike price on the option is $52 and the risk-free interest rate is 5 percent per step. Please report your answer to two decimal places.

The current price of a stock is $40. The price of a one-year European put option...

The current price of a stock is $40. The price of a one-year European put option on the stock with a strike price of $30 is quoted at $2 and the price of a one-year European call option on the stock with a strike price of $50 is quoted at $3. (2 points) Investor D wants to own the shares but wants to reduce his initial investment cost. So he buys the stock and shorts the call option on 100...

The price of a non-dividend-paying stock is $66. A two-month American put option on the stock...

The price of a non-dividend-paying stock is $66. A two-month American put option on the stock with a strike price of $70 is selling for $10. What is the time value (TV) of this put option?

A stock`s current price is $30. A put option written on this stock has the exercise...

A stock`s current price is $30. A put option written on this stock has the exercise price at $32. The time to maturity of this put option is 2 years, and the risk-free rate is 5% per year. If currently, this put option is selling at $2.1, please find the implied volatility of the stock.

There is an American put option on a stock that expires in two months. The stock...

There is an American put option on a stock that expires in two months. The stock price is $55, and the standard deviation of the stock returns is 64 percent. The option has a strike price of $62, and the risk-free interest rate is an annual percentage rate of 4.4 percent. What is the price of the option? Use a two-state model with one-month steps. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)...

There is an American put option on a stock that expires in two months. The stock...

There is an American put option on a stock that expires in two months. The stock price is $100 and the standard deviation of the stock returns is 72 percent. The option has a strike price of $112 and the risk-free interest rate is an annual percentage rate of 5.6 percent. What is the price of the option? Use a two-state model with one-month steps

There is an American put option on a stock that expires in two months. The stock...

There is an American put option on a stock that expires in two months. The stock price is $69 and the standard deviation of the stock returns is 59 percent. The option has a strike price of $78 and the risk-free interest rate is an annual percentage rate of 5.8 percent. What is the price of the option? Use a two-state model with one-month steps. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Suppose that a European put option has a strike price of $150 per share, costs $8...

Suppose that a European put option has a strike price of $150 per share, costs $8 per share, and is held until maturity. a) Under what circumstances will the seller of the option make a profit? b) Under what circumstances will the buyer exercise the option? c) Draw a diagram (or a table) illustrating how the profit from a short position in the option depends on the stock price at the maturity of the option.

Question

Current stock price is $150; volatilityis 20% per annum. An at-the-money American put option on the...

Solutions

Expert Solution

Related Solutions

Current stock price is $150; volatility is 20% per annum. An at-the-money European put option on...

A put option on a stock expires in 7 months with a strike price of 150....

Use a 2-step binomial tree to price an american style put option when the current stock...

The current price of a stock is $40. The price of a one-year European put option...

The price of a non-dividend-paying stock is $66. A two-month American put option on the stock...

A stock`s current price is $30. A put option written on this stock has the exercise...

There is an American put option on a stock that expires in two months. The stock...

There is an American put option on a stock that expires in two months. The stock...

There is an American put option on a stock that expires in two months. The stock...

Suppose that a European put option has a strike price of $150 per share, costs $8...