A stock currently sells for $50. In six months it will either rise to $60 or...
A stock currently sells for $50. In six months it will either rise to $60 or decline to $45. The continuous compounding risk-free interest rate is 5% per year.
- Using the binomial approach, find the value of a European call option with an exercise price of $50.
- Using the binomial approach, find the value of a European put option with an exercise price of $50.
- Verify the put-call parity using the results of Questions 1 and 2.
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A stock currently sells for $50. In six months it will either
rise to $60 or...
A stock price is currently $50. It is known that at the end of 6 months...
A stock price is currently $50. It is known that at the end of 6 months it will be either $45 or $55. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a 6-month European put option with a strike price of $50?
ABC's stock price is 88 and in 3 months it will either increase (probability is 50%)...
ABC's stock price is 88 and in 3 months it will either increase (probability is 50%) by 25% or fall by 25%. Then again over the next 3 months (i.e. from month 3 to month 6) it will again increase (probability is 50%) by 25% or fall by 25%. The risk- free rate for 3 months is constant and equal to 2% (not annualized). a) Find the price of a 6-month European call on ABC stock with exercise price of...
ABC's stock price is 88 and in 3 months it will either increase (probability is 50%)...
ABC's stock price is 88 and in 3 months it will either increase (probability is 50%) by 25% or fall by 25%. Then again over the next 3 months (i.e. from month 3 to month 6) it will again increase (probability is 50%) by 25% or fall by 25%. The risk- free rate for 3 months is constant and equal to 2% (not annualized). a) Find the price of a 6-month European call on ABC stock with exercise price of...
The spot price of SPY is currently (So= $200) the volatility of SPY is 60% (sigma=...
The spot price of SPY is currently (So= $200) the volatility of SPY is 60% (sigma= 0.060) We are onvested on valuing SPY option at the end of 6 months (T= 6/12= 0.5). The risk free rate with continuous compounding is 4% per amum (r= 0.04) Apply Arbitrage Portfolio approach with one step binomial tree and calculate de value of a six month European call option on SPY with an exercise/strike price of $220 (K=$220)
Finance - Derivative Securities
1) A stock price is currently $100. Over each of the next two six-month periods it is expected togo up by 10% or down by 10%. The risk-free interest rate is 8% per annum with continuouscompounding. What is the value of a one-year European call option with a strike price of $100?2) For the situation considered in the previous problem, what is the value of a one-year Europeanput option with a strike price of $100? Verify that the European call...
Suppose Disney's stock price is currently $100. In the next six months it will either fall...
Suppose Disney's stock price is currently $100. In the next six months it will either fall to $80 or rise to $120. What is the option delta of a put option with an exercise price of $100? Need more information. It depends on the risk-free rate. 0.5 -0.5 0
Problem1 A stock is currently trading at S $40, during next 6 months stock price will increase to $44 or decrease to $32-6-month risk-free rate is rf-2%. a. [4pts) What positions in stock and T-...
Problem1 A stock is currently trading at S $40, during next 6 months stock price will increase to $44 or decrease to $32-6-month risk-free rate is rf-2%. a. [4pts) What positions in stock and T-bills will you put to replicate the pay off of a European call option with K = $38 and maturing in 6 months. b. 1pt What is the value of this European call option? Problem 2 Suppose that stock price will increase 5% and decrease 5%...
1. A stock price is currently $50. It is known that at the end of 1...
1. A stock price is currently $50. It is known that at the end of 1 year it will be either $40 or $60. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a one-year European CALL option with a strike price of $50? Please use Non-arbitrage approach (8 points) Formula approach (8 points)
5. A stock sells at $50. The price will be either $57.5 or $47.5 three months from now. Assume the risk-free rate is 12%...
5. A stock sells at $50. The price will be either $57.5 or $47.5 three months from now. Assume the risk-free rate is 12% per annum with continuous compounding. Consider a call option on the stock that has a strike price of $52.5 and a maturity of 3 months. a) Find a portfolio of the stock and bonds such that buying the call is equivalent to holding the portfolio. What is the cost of the portfolio? And what is the...
A stock selling at $50 will either go up 20% or go down 10% each month...
A stock selling at $50 will either go up 20% or go down 10% each month for the next 3 months. The risk-free rate is 12% per annum with continuous compounding. Assume that a European put option is available for a strike price of $55 and a maturity of 3 months. a. Use a 3-step binomial model to calculate the price of the put option.
ABC's stock price is 88 and in 3 months it will either increase (probability is 50%) by 25% or fall by 25%. Then again over the next 3 months (i.e. from month 3 to month 6) it will again increase (probability is 50%) by 25% or fall by 25%. The risk- free rate for 3 months is constant and equal to 2% (not annualized). a) Find the price of a 6-month European call on ABC stock with exercise price of...
ABC's stock price is 88 and in 3 months it will either increase (probability is 50%) by 25% or fall by 25%. Then again over the next 3 months (i.e. from month 3 to month 6) it will again increase (probability is 50%) by 25% or fall by 25%. The risk- free rate for 3 months is constant and equal to 2% (not annualized). a) Find the price of a 6-month European call on ABC stock with exercise price of...
Suppose Disney's stock price is currently $100. In the next six months it will either fall to $80 or rise to $120. What is the option delta of a put option with an exercise price of $100? Need more information. It depends on the risk-free rate. 0.5 -0.5 0
Problem1 A stock is currently trading at S $40, during next 6 months stock price will increase to $44 or decrease to $32-6-month risk-free rate is rf-2%. a. [4pts) What positions in stock and T-bills will you put to replicate the pay off of a European call option with K = $38 and maturing in 6 months. b. 1pt What is the value of this European call option? Problem 2 Suppose that stock price will increase 5% and decrease 5%...
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