(A) A stock price is currently AUD 40 and it is known that at the end...

(A) A stock price is currently AUD 40 and it is known that at the end of three months it will be either AUD 44 or AUD 36. We are interested in valuing a European call option.

(ii) If the delta of the above European call is 0.25, what is the delta of the European put for the same strike and maturity?

(i) Using the risk-free rate of 12% per annum; Apply stock-option replicating portfolio strategy to value this European call option when the strike is AUD 42.

(B) A stock price is currently AUD 60; the risk-free rate is 5% and the volatility σ is 30%. What is the value of a two-year American put option with a strike price of AUD 62?

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jeff jeffy answered 1 year ago

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