The put-call parity holds only when future stock price changes as described in a binomial tree.
(a) True
(b) False
The put-call parity holds only when future stock price changes as described in a binomial tree....
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.
Consider the binomial model for an American call and put on a stock whose price is $90. The exercise price for both the put and the call is $65. The standard deviation of the stock returns is 25 percent per annum, and the risk-free rate is 6 percent per annum. The options expire in 120 days. The stock will pay a dividend equal to 4 percent of its value in 60 days. (a) Draw the three-period stock tree and the...
Assume put-call parity holds. One stock is selling for $33 per share. Calls with a $30 strike and 180 days until expiration are selling for $6. What should be the put price? Suppose risk-free rate is 4%.
Part II (Binomial Tree) ai' 1. Compute the price of a call option using the stock price tree u1.4634 and d=0.7317. The stock price is $38. The strike price is 840 and the interest rate is 8%. The time-period is 6 month. Use a 2 stage binomial tree 2. Assume that where ?-8%, the dividend yield ?. 0, ? is the annual standard deviation and ?VE is the standard deviation over a period of length h. The initial stock price...
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%...
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
Problem 22-8 Put-Call Parity A put option and a call option with an exercise price of $75 and three months to expiration sell for $1.35 and $5.70, respectively. If the risk-free rate is 4.4 percent per year, compounded continuously, what is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price
Put-Call Parity The current price of a stock is $35, and the annual risk-free rate is 3%. A call option with a strike price of $31 and with 1 year until expiration has a current value of $6.60. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent. How do you calculate the negative...
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...