First calculate the delta of the following option. Then use this delta to ESTIMATE the new...

First calculate the delta of the following option. Then use this delta to ESTIMATE the new price of a European call option if the stock price increases by $4. The option has the following the following initial parameters:

s0 = $40
k = $35
r = 10%
sigma = 20%
T = 0.75 years

Solutions

Expert Solution

Original call price=7.8755

Delta=0.9016

New call price=7.8755+0.9016*4=11.4819

jeff jeffy answered 9 months ago

Next > < Previous

Related Solutions

Use delta H f and S to calculate delta G rxn (delta g not sys) at...

Use delta H f and S to calculate delta G rxn (delta g not sys) at 25 C for the reaction below: 4KClO3 (s) --> 4KClO4 (s) + KCL (s) Delta H not f KCLO3 = -397.7 kj/mol; KCLO4 = -432.8 kJ/mol; KCL = -436.7 kJ/mol S KCLO3 = 143.1 kJ/mol ; KCLO4= 151.0 kJ/mol; KCL = 82.6 kJ/mol

What is the option delta? Delta = Spread of Option Price / Spread of Stock price...

What is the option delta? Delta = Spread of Option Price / Spread of Stock price Spread of Option Price = (40 * 1.2) – 40 = 8 Spread of Stock price = (40 * 1.2) – (40 * 0.833) = 14.7 Delta = 8 / 14.7 Delta = 0.544 What is (1,2) and (0.833) it this calculation?

Use a table of thermodynamic data to calculate the enthalapy (delta H) for the following three...

Use a table of thermodynamic data to calculate the enthalapy (delta H) for the following three reactions: Mg (s) + 1/2 O2 (g) --> MgO (s) Mg (s) + 2 HCl (aq) -----> MgCl2 (aq) + H2 (g) MgO(s) + 2HCl(aq) ----> H2O(l) + MgCl2(aq)

What is an option delta? If delta is 0.5 what does this mean? How does delta...

What is an option delta? If delta is 0.5 what does this mean? How does delta change when the option is in-the-money, at-the-money, and out-of-the-money

Which of the following liabilities usually requires the use of an estimate when it is first...

Which of the following liabilities usually requires the use of an estimate when it is first recorded? Warranty obligation Mortgage payable Accounts payable Unearned revenue

Calculate the Delta Ho , Delta So Delta S surroundings, Delta S universe and Delta Go...

Calculate the Delta Ho , Delta So Delta S surroundings, Delta S universe and Delta Go for the following reaction at 25 oC: 2 NiS (s) + 3 O2 (g) --- > 2 SO2 (g) + 2 NIO (s) Delta Ho = - 890.0 kJ Delta So SO2 (g) = 248 J/K mol, Delta So NiO (s) = 38 J/K mol, Delta So O2 (g) = 205 J/K mol, Delta So NiS (s) = 53 J/K mol

Use the B-S OPM to calculate the value of a call option with the following data:...

Use the B-S OPM to calculate the value of a call option with the following data: Price of the underlying stock = $30; strike price = $35; risk-free rate of return = 5%; variance of the stock returns = .25; and time to expiry of the call option is 4 months Please show your work!

Question