6. A stock currently costs $4 per share. In each time period, the value of th<e...
6. A stock currently costs $4 per share. In each time period, the value of th<e stock will either increase or decrease by 50%, and the risk-free interest rate is r 1/10. Let So, Si, and S2 be the prices of the stock at times 0, 1, and 2, and suppose we are selling a European-style call option expiring at time 2, with a strike price of vS1S2. That is, the value of the option at time 2 is (S2-VS152)+....
1. (Put-call parity) A stock currently costs So per share. In each time period, the value of the stock will either increase or decrease by u and d respectively, and the risk-free interest rate is r. Let Sn be the price of the stock at t-n, for O < n < N, and consider three derivatives which expire at t - V, a cal option Voll-(SN-K)+, a put option VNut-(X-Sy)+, and a forward option VN(SN contract FN SN N) ,...
1. (Put-call parity) A stock currently costs So per share. In each time period, the value of the stock will either increase or decrease by u and d respectively, and the risk-free interest rate is r. Let Sn be the price of the stock at t n, for O < n < V, and consider three derivatives which expire at t- N, a call option Vall-(SN-K)+, a put option Vpul-(K-Sy)+, ad a forward contract Fv -SN -K (a) The forward...
RST, Inc. stock is currently trading for $33 per share. The stock pays no dividends. A one-year European call option on RST with a strike price of $36 is currently trading for $2.99. If the risk-free interest rate is 6% per year, what is the price of a one-year European put option on RST with a strike price of $36? (Rounded to the nearest cent.)
Dynamic Energy Systems stock is currently trading for $29 per share. The stock pays no dividends. A one-year European put option on Dynamic with a strike price of $32 is currently trading for $3.69. If the risk-free interest rate is 3% per year, what is the price of a one-year European call option on Dynamic with a strike price of $32? (Rounded to the nearest cent.)
The price of a share of stock is currently $50. The stock does not pay any dividend. At the end of three months it will be either $60 or $40. The risk-free interest rate is 5% per year. What is the value of a three-month European put option on this share of stock with a strike price of $50?
The price of a share of stock is currently $50. The stock does not pay any dividend. At the end of three months it will be either $60 or $40. The risk-free interest rate is 5% per year. An investor buys a European put option with a strike price of $50 per share. Assume that the option is written on 100 shares of stock. What stock position should the investor take today so that she would hold a riskless portfolio...
A stock is currently selling for $75 per share. You could purchase a call with a strike price of $70 for $7. You could purchase a put with a strike price of $70 for $2. Calculate the intrinsic value of the call option. Calculate the time value of the call option. Calculate the intrinsic value of the put option. Calculate the time value of the put option.
Value of a stock is currently at $40. Volatility of that stock is 30% per year and risk-free interest rate with continuous compounding is at 5% per year. Suppose you are planning to value a 3-month European call option with strike price at $41 using a two-step binomial model. Answer the following using this information. (Binomial Tree Approach to Option Valuation describe how to solve this problem) What are the values of u, d and q?
Create a four-period binominal price tree and find the fair value of an European call and put options and an American put option on a nondividend-paying stock if the initial stock price is 82 PLN, the strike price of 80 PLN is expiring at the end of the fourth month, the compound risk-free interest rate is 12% per annum, and σ= 0.1 .