Time years =6/12 =0.5
Stock Price =65
Strike Price =60
Lower Bound =Stock Price -Strike Price*e^(-rt) =65-60*e^(-8%*0.5)
=7.35
What is a lower bound for the price of a 6 month call option on a...
8. Derivatives 8a. What is a lower bound for the price of a two-month call option on a non-dividend-paying stock when the stock price is $29, the strike price is $24, and the risk-free interest rate is 4% per annum? 8b. Please show the arbitrage strategy if the price of this option is below the lower bound. 8c. What if there is a $3 cash dividend in 1 month, what would be the new lower bound?
What is a lower bound for the price of a six-month call option on a non-dividend-paying stock when the stock price is $38, the strike price is $18, and the risk-free interest rate is 7% per annum?
5.6. What is a lower bound for the price of a six-month call option on a non-dividend-paying stock when the stock price is $80, the strike price is $75, and the risk-free interest rate is 10% per annum?
(b) A 6-month European call option on a non-dividend paying stock is cur- rently selling for $3. The stock price is $50, the strike price is $55, and the risk-free interest rate is 6% per annum continuously compounded. The price for 6-months European put option with same strike, underlying and maturity is 82. What opportunities are there for an arbitrageur? Describe the strategy and compute the gain.
What is the price of a European call option according to the Black-Sholes formula on a non-dividend-paying stock when the stock price is $45, the strike price is $50, the risk-free interest rate is 12% per annum, the volatility is 25% per annum, and the time to maturity is six months? Show your work in details.
A six-month European call option on a non-dividend-paying stock is currently selling for $6. The stock price is$64, the strike price is S60. The risk-free interest rate is 12% per annum for all maturities. what opportunities are there for an arbitrageur? (2 points) 1. a. What should be the minimum price of the call option? Does an arbitrage opportunity exist? b. How would you form an arbitrage? What is the arbitrage profit at Time 0? Complete the following table. c....
25. The price of a stock with no dividends, is $35 and the strike price of a 1year European call option on the stock is $30. The risk-free rate is 4% (continuously compounded). Compute the lower bound for the call option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound? Please show your work. 26. A stock price with no dividends is $50 and...
For a non-dividend paying stock, a current stock price of $54.38, an exercise price of $50, with a risk-free rate of return equaling 9.35% per annum; calculate the lower bound for the price of a five-month call option.
A 10-month European call option on a stock is currently selling for $5. The stock price is $64, the strike price is $60. The continuously-compounded risk-free interest rate is 5% per annum for all maturities. a) Suppose that the stock pays no dividend in the next ten months, and that the price of a 10-month European put with a strike price of $60 on the same stock is trading at $1. Is there an arbitrage opportunity? If yes, how can...
A 9-month American put option on a non-dividend-paying stock has a strike price of $49. The stock price is $50, the risk-free rate is 5% per annum, and the volatility is 30% per annum. Use a three-step binomial tree to calculate the option price.