Question
In: Finance
A 6 month futures contract trades on orange juice futures. The current orange juice futures price...
A 6 month futures contract trades on orange juice futures. The current orange juice futures price is 1200, with volatility 18%. Interest rates are 0.5% (with continuous compounding). What is the price of a three month European put option with strike price 1210? Use the Black-Scholes formula to solve
Solutions
Expert Solution
Calculation of put price with the help of Black-Scholes formula
| INPUTS | Outputs | Value | |
| Standard deviation or Volatility (Annual) (σ) | 18.00% | d1 | -0.03332 |
| Time until Expiration (in Years) (t) | 0.25 | d2 | -0.12332 |
| Risk free rates (Annual) (r) | 0.50% | N(d1) | 0.48671 |
| Current orange juice futures price (S0) | $ 1,200.00 | N(d2) | 0.45093 |
| Strike price (X) | $1,210.00 | B/S call value (C ) | 39.11175 |
| Dividend yield | 0 | B/S Put Value (P) | 47.60020 |
The price of a three month European put option is $47.60
Formulas used in excel calculation:
jeff jeffy answered 1 year agoRelated Solutions
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day 0 to day 6 look like the following:
Day
Settlement Price
0
82
1
84
2
78
3
73
4
79
5
82
6
84
(1) Suppose...
Consider a hypothetical futures contract in which the current price is $82. The initial margin requirement...
Consider a hypothetical futures contract in which the current
price is $82. The initial margin requirement is $5, and the
maintenance margin requirement is $2. You go long 20 contracts and
meet all margin calls but do not withdraw any excess margin.
The settlement price and the spot price of the underlying from
day 0 to day 6 look like the following:
Day
Settlement Price
0
82
1
84
2
78
3
73
4
79
5
82
6
84
(1) Suppose...
Consider a hypothetical futures contract in which the current price is $82. The initial margin requirement...
Consider a hypothetical futures contract in which the current
price is $82. The initial margin requirement is $5, and the
maintenance margin requirement is $2. You go long 20 contracts and
meet all margin calls but do not withdraw any excess margin.
The settlement price and the spot price of the underlying from
day 0 to day 6 look like the following:
Day
Settlement Price
Spot Price of the Underlying
0
82
80
1
84
81
2
78
80
3...
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