Question
In: Finance
What is the price of an American-style call option assuming a 4% annual risk-free rate, a...
- What is the price of an American-style call option assuming a 4% annual risk-free rate, a strike price = $150, and 3 years to maturity. In each year the price can either rise by a factor of 1.3 or fall by a factor of 0.9. The current price of the underlying asset is $100 and it pays no dividends.
- Why is the price in part a different than you would get from inputting a 10% drift and 20% volatility into the Black Scholes equation?
- What would be the price of an American-style put option on the same stock with the same maturity as in part a above?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
What is the price of an American-style call option assuming a 4% annual risk-free rate, a...
What is the price of an American-style call option assuming a
4% annual risk-free rate, a strike price = $150, and 3 years to
maturity. In each year the price can either rise by a
factor of 1.3 or fall by a factor of 0.9. The current
price of the underlying asset is $100 and it pays no dividends.
Why is the price in part a different than you would get from
inputting a 10% drift and 20% volatility into the Black...
What is the price of an American-style call option assuming a 4% annual risk-free rate, a...
What is the price of an American-style call option assuming a
4% annual risk-free rate, a strike price = $150, and 3 years to
maturity. In each year the price can either rise by a
factor of 1.3 or fall by a factor of 0.9. The current
price of the underlying asset is $100 and it pays no dividends.
Why is the price in part a different than you would get from
inputting a 10% drift and 20% volatility into the Black...
What is the price of an American call option that is expected to pay a dividend...
What is the price of an American
call option that is expected to
pay a dividend of $1 in three months with
the following parameters?
s0 = $40
d = $1 in 3 months
k = $42
r = 10%
sigma = 20%
T = 0.5 years
The current price of a stock is $ 55.52 and the annual effective risk-free rate is...
The current price of a stock is $ 55.52 and the annual effective
risk-free rate is 3.4 percent. A call option with an exercise price
of $55 and one year until expiration has a current value of $ 12.80
. What is the value of a put option written on the stock with the
same exercise price and expiration date as the call option? Show
your answer to the nearest .01. Do not use $ or , in your answer....
The current price of a stock is $32, and the annual risk-free rate is 5%. A...
The current price of a stock is $32, and the annual risk-free
rate is 5%. A call option with a strike price of $29 and with 1
year until expiration has a current value of $6.40. What is the
value of a put option written on the stock with the same exercise
price and expiration date as the call option? Do not round
intermediate calculations. Round your answer to the nearest
cent.
The current price of a piece of Gold jewelry is $1380. The annual risk free rate...
The
current price of a piece of Gold jewelry is $1380. The annual risk
free rate is 3 percent. A put option on the jewelry with an
exercise price of $1390 and one year until expiration has a current
value of $19.25. A call option on the jewelry with an exercise
price of $1390 has a current value of $21.35 is there an arbitrage
opportunity? If yes, what is the value of the arbitrage? Explain
exactly how exploit the arbitrage
Local risk-free rate (r) = 2% annual. Foreign risk-free rate (rf) = 3% annual. Exchange rate...
Local risk-free rate (r) = 2% annual. Foreign risk-free rate
(rf) = 3% annual. Exchange rate = $/euro. The current market
exchange rate (S0) = 1.5. Suppose the current market two-year
futures price (F0) = 1.4. Is there any arbitrage profit? If there
is an arbitrage profit, compute the profit. Assume that you take a
loan in Germany. The loan = euro 1000.
A. Yes, the arbitrage profit is higher than $70.
B. Yes, the arbitrage profit is higher than...
Consider a European-style call option with an exercise price of 105 euros expiring exactly in a...
Consider a European-style call option with an exercise price of
105 euros expiring exactly in a year and a European-style put
option with an exercise price of 105 euros expiring exactly in a
year. The current stock price is 110 euros, the risk-free interest
rate is 10% per annum, the price of this call option is 14.50 euros
and the price of put option is 2.50 euros. Suppose that you can
borrow and lend the money at risk-free rate. For...
A call option with a strike price of 55$ can be bought fo $4 what will...
A call option with a strike price of 55$ can be bought fo $4
what will be your net profit if you sell the call and the stock
price is 52$ when the call expires?
Can you please elaborate on the answer. thanks
The current stock price of KMW is $27, the risk-free rate of return is 4%, and...
The current stock price of KMW is $27, the risk-free rate of
return is 4%, and the standard deviation is 30%. What is the price
of a 63-day call option with an exercise price of $25?
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