Question 16. You know that put call parity must hold and you observe the following information in the market:
Spot: 195kr
Strike: 180kr
Call premium: 24kr
Put premium: 7kr
Time to maturity: 9 months exactly
(the Call and the Put options have the same underlying security, strike price and maturity date)
Question 16. You know that put call parity must hold and you observe the following information...
2 Put-call parity [LO 3] You observe the following prices in a situation in which European pul-call parily ought to apply: Put price $1.95 Call price $1.10 Share price $20.00 Exercise price $22.00 Term to expiry 4 months Risk-free interest rate 1% per month (compound) BUSINESS FINANCE a) Show that pul-coll parity is breached in this case. b) Calculate the payoffs to show that the following strategy is an arbitrage: sell the call, buy the put, buy the shore and...
9. Put-call parity and the value of a put option Aa Aa E Consider two portfolios A and B. At the expiration date, t, both portfolios have identical payoffs. Portfolio A consists of a put option and one share of stock. Portfolio B has a call option (with the same strike price and expiration date as the put option) and cash in the amount equal to the present value (PV) of the strike price discounted at the continuously compounded risk-free...
Calculate the price of a 45-day futures contract, if you know that 45-day call options on the underlying with strike of $258 trade for c=$22.3 and put options with the same maturity and exercise price trade for $10.2. The risk free rate is 1.5%. Please provide your answer rounded to two decimals.
Given the following parameters use put-call parity to determine the price of a put option with the same exercise price. Current stock price: $48.00 Call option exercise price: $50.00 Sales price of call options: $3.80 Months until expiration of call options: 3 Risk free rate: 2.6 percent Compounding: Continuous A) Price of put option = $5.48 B) Price of put option = $4.52 C) Price of put option = $6.13
Given the following parameters use put-call parity to determine the price of a put option with the same exercise price. Show your work. Current stock price: $48.00 Call option exercise price: $50.00 Sales price of call options: $3.80 Months until expiration of call options: 3 Risk free rate: 2.6 percent Compounding: Continuous A) Price of put option = $5.48 B) Price of put option = $4.52 C) Price of put option = $6.13
11. With respect to put-call parity, a covered call is equivalent to? A. Buying a call B. Selling a put C. Selling a put and invest in risk-free bond D. Selling a put and borrow from risk-free bond E. None above The following information is used for Question 12-15; You want to establish a straddle on Apple. The available call premium is $5 and put premium is $6. Suppose X=$50 for both the call and the put. 12. What is...
A put option and a call option on a stock have the same expiration date and the same exercise (or strike price). Both options expire in 6 months. Assume that put-call parity holds and interest rate is positive. If both call and put options have the same price, which of the following is true? A) Put option is in-the-money. B) Call option is in-the-money. C) Both call and put options are in-the-money. D) Both call and put options are out-of-the-money.
Question 17. You have the following information for a three-month Call option. S(0): 150 kr X: Call: rf: T: 140 kr 12 kr 1% 3 months (S(0) = Stock price at time 0, X = Strike price, Call = price or a Call option, rf = the risk free rate, T = time to maturity) a) How much is a three month Put option worth with the same strike and underlying asset? b) What would rf have to be for...
Financial QUESTION # 3 What is a Binomial Tree? How many terminal stock prices would it be if the binomial tree has 30 time steps? Max. Marks 3-1.5x2] ANSWER [Max. Marks 3] QUESTION # 4 Suppose that put-call parity exists for the call and put prices of $3 and $2.5 respectively. The options are of same maturity of 9 months on the stock with spot price of $45. If the available 6- month and 9-months risk-free interest rates are 5%...
Use the following information for questions 9 and 10 below. You may assume (for simplicity) that both put and call option contracts for gold are for a quantity of one ounce of gold. Both the put and call options have the same maturity. The premium for the call is $2/ounce and the premium for the put is $1/ounce. Both options have a strike price of $1100/ounce. An investor writes (or sells) one put option contract. If the price of gold...