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A futures price is currently $25, its volatility (SD) is 30% per annum, and the risk-free...

A futures price is currently $25, its volatility (SD) is 30% per annum, and the risk-free interest rate is 10% per annum. What is the value of a nine-month European call on the futures with a strike price of $26 according to the BSM option pricing model?

2.50

2.936

3.50

3.20

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Expert Solution

Solution:

It is given that the stock future price = $25, Strike = $26, Volatility = 30%, Risk-free rate = 10%, T= 9 months = 9/12 =0.75year

According to the Black Scholes model, the call price comes to be 3.00. The closest option is  B ) 2.936

jeff jeffy answered 1 year ago
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