Question
In: Finance
Q8. SPX index at 3000. Assume normal distribution for index price. Consider a Binary CALL option...
Q8. SPX index at 3000. Assume normal distribution for index price. Consider a Binary CALL option with strike of 3250.
a. If IV is 30%, what is fair price for the BINARY call (5 points)?
b. If the binary call is price at 0.20, what is the implied volatility (aka implied stdev) (5 points)?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Q8. SPX index at 3000. Assume normal distribution for index price. Consider a Binary CALL option...
Q8. SPX index at 3000. Assume normal distribution for index
price. Consider a Binary CALL option with strike of 3250.
a. If IV is 30%, what is fair price for the BINARY call?
b.If the binary call is price at 0.20, what is the implied
volatility (aka implied standard deviation)?
Q8. SPX index at 3000. Assume normal distribution for index price. Consider a Binary CALL option...
Q8. SPX index at 3000. Assume normal distribution for index
price. Consider a Binary CALL option with strike of 3250.
a. If IV is 30%, what is fair price for the BINARY call (5
points)?
b. If the binary call is price at 0.20, what is the implied
volatility (aka implied stdev) (5 points)?
Q8. SPX index at 3000. Assume normal distribution for index price. Consider a Binary CALL option...
Q8. SPX index at 3000. Assume normal distribution for index
price. Consider a Binary CALL option with strike of 3250.
a. If IV is 30%, what is fair price for the BINARY call (5
points)?
b. If the binary call is price at 0.20, what is the implied
volatility (aka implied stdev) (5 points)?
Q8. SPX index at 3000. Assume normal distribution for index price. Consider a Binary CALL option...
Q8. SPX index at 3000. Assume normal distribution for index
price. Consider a Binary CALL option with strike of 3250.
a. If IV is 30%, what is fair price for the BINARY call (5
points)?
b. If the binary call is price at 0.20, what is the implied
volatility (aka implied stdev) (5 points)?
Q8. SPX index at 3000. Assume normal distribution for index price. Consider a Binary CALL option...
Q8. SPX index at 3000. Assume normal distribution for index
price. Consider a Binary CALL option with strike of 3250.
a. If IV is 30%, what is fair price for the BINARY call (5
points)?
b. If the binary call is price at 0.20, what is the implied
volatility (aka implied stdev) (5 points)?
S&P 500 Index is at 2780. A European June 21, 2019 SPX call option struck at...
S&P 500 Index is at 2780. A European June 21, 2019 SPX call
option struck at 2500 is trading at $316.94. An identical put is
trading at $55.15. A T-bill with 200 days to maturity is quoted at
a yield of 2.46.
From the T-bill, calculate the discount factor
Use the discount factor from part a to check the lower-bound
condition for the call and the put
Use the discount factor from part a to check put-call
parity.
Design a...
Suppose you buy one SPX call option with a strike of 2135 and write one SPX...
Suppose you buy one SPX call option with a strike of 2135 and
write one SPX call option with a strike of 2195. What are the
payoffs at maturity to this position for S&P 500 Index levels
of 2050, 2100, 2150, 2200, and 2250? (A negative value
should be indicated by a minus sign. Leave no cells blank - be
certain to enter "0" wherever required.)
Index
level Long
call payoff Short call
payoff
Total payoff
2050
2100
2150
2200 ...
Suppose you buy one SPX call option with a strike of 2140 and write one SPX...
Suppose you buy one SPX call option with a strike of 2140 and
write one SPX call option with a strike of 2185. What are the
payoffs at maturity to this position for S&P 500 Index levels
of 2050, 2100, 2150, 2200, and 2250? (A negative value
should be indicated by a minus sign. Leave no cells blank - be
certain to enter "0" wherever required.)
Index level
Long call payoff
Short call payoff
Total payoff
2050
0
2100
0...
Assume that the stock price is $56, call option price is $9, the put option price...
Assume that the stock price is $56, call option price is $9, the
put option price is $5, risk-free rate is 5%, the
maturity of both options is 1 year , and the strike price of both
options is 58.
An investor can __the put option, ___the call option,
___the stock, and ______ to explore the arbitrage
opportunity.
A.
sell, buy, short-sell, lend
B.
buy, sell, buy, borrow
C.
sell, buy, short-sell, borrow
D.
buy, sell, buy, lend
Consider a call option on a stock, the stock price is $23, the strike price is...
Consider a call option on a stock, the stock price is $23, the
strike price is $20, the continuously risk-free interest rate is 9%
per annum, the volatility is 39% per annum and the time to maturity
is 0.5.
(i) What is the price of the option? (6 points).
(ii) What is the price of the option if it is a put? (6
points)
(iii) What is the price of the call option if a dividend of $2
is expected...
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