Question
In: Finance
A stock price is currently $50. Over each of the next two 3-month periods it is...
A stock price is currently $50. Over each of the next two
3-month periods it is expected to go up by 6% or down by 5%. The
risk-free interest rate is 5% per annum with continuous
compounding.
(a) What is the value of a 6-month European put option with a
strike price of $51? (b) What is the value of a 6-month American
put option with a strike price of $51?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A stock price is currently $50. Over each of the next two 3-month periods it is...
A stock price is currently $50. Over each of the next two
3-month periods it is expected to go up by 6% or down by 5%. The
risk-free rate is 5% per annum with continuous compounding. What is
the value of a six-month European call option with a strike price
of $51?
A stock price is currently $50. Over each of the next two 3-month periods it is...
A stock price is currently $50. Over each of the next two
3-month periods it is expected to go up by 6% or down by 5%. The
risk-free rate is 5% per annum with continuous compounding. What is
the value of a six-month European call option with a strike price
of $51? 4
Calculate the price of the put option in problem 3 if it was
American.
A stock price is currently $50. Over each of the next two three-month periods, it is...
A stock price is
currently $50. Over each of the next two three-month periods, it is
expected to increase by 10% or fall by 10%. Consider a six month
American put option with a strike price of $49.5. The risk
free rate is 6%. Work out the the two step binomial option pricing
fully and fill in the asked questions. (Work out
using 4 decimals and then enter your answers rounding to two
decimals without $ sign)
a)
S0uu= Blank...
A stock price is currently $50. Over each of the next two three-month periods it is...
A stock price is currently $50. Over each of the next two
three-month periods it is expected to go up by 7% or down by 6%.
The risk-free interest rate is 9% per annum with continuous
compounding. What is the value of a six-month European call option
with a strike price of $49? Equations you may find helpful: p =
(e^(rΔt)-d) / (u-d) f = e^(-rΔt) * (fu*p + fd*(1-p)) (required
precision 0.01 +/- 0.01)
A stock price is currently $50. Over each of the next two three-month periods it is...
A stock price is currently $50. Over each of the next
two three-month periods it is expected to
go up by 5% or down by 6%. The risk-free interest rate is 10% per
annum with continuous compounding. What is the value of a six-month
European call option with a strike price
of $49?
A stock price is currently $50. Over each of the next two three-month periods it is...
A stock price is currently $50. Over each of the next two
three-month periods it is expected to go up by 6% or down by 6%.
The risk-free interest rate is 6% per annum with continuous
compounding. What is the value of a six-month American
put option with a strike price of
$53?
A stock price is currently $40. Over each of the next two 3-month periods it is...
A stock price is currently $40. Over each of the next two
3-month periods it is expected to go up by 10% or down by 10%. The
risk-free interest rate is 12% per annum withcontinuous
compounding.
(a) What is the value of a 6-month European put option with a
strike price of $42? (b) What is the value of a 6-month American
put option with a strike price of $42?
A stock price is currently Ksh40. Over each of the next two 3-month periods it is...
A stock price is currently Ksh40. Over each of the next two
3-month periods it is expected to go up by 10% or down by 10%. The
risk-free interest rate is 12% per annum with continuous
compounding. Suppose that the volatility σ is 9.53% and ∇
is 0.25.
What is the value of a 6-month European put option with a
strike price of Ksh42?
ii. What is the value of a 6-month American call option with a...
A stock is currently at $50. Over each of the next two 6-month periods, the stock...
A stock is currently at $50. Over each of the next two 6-month
periods, the stock may move up to a factor 1.2 or down by a factor
of 0.8 in each period. A European put option with strike price of
$48 and maturity of one year is available. The current risk-free
rate is 4.0% per year.
a. Is the put option in the money or out the money? Explain
b. What is the current value of this European put...
A stock is currently at $50. Over each of the next two 6-month periods, the stock...
A stock is currently at $50. Over each of the next two 6-month
periods, the stock may move up to a factor 1.2 or down by a factor
of 0.8 in each period. A European put option with strike price of
$48 and maturity of one year is available. The current risk-free
rate is 4.0% per year .
a. Is the put option in the money or out the money? Explain
b. What is the current value of this European...
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