Homework Answers
It is never optimal to exercise an American call option on a non dividend paying stock hence the flexibility provided in terms of exercise by American call option does not have any value. Therefore, American call option on a non-dividend paying stock always has the same price as its European counterpart.
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*25. Explain why an American call option on a non-dividend-paying stock always has the same price...
*25. Explain why an American call option on a non-dividend-paying stock always has the same price...
*25. Explain why an American call option on a non-dividend-paying stock always has the same price as its European counterpart.
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price...
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. Use the Black-Scholes-Merton formula. What is the price of the option if it is a European call? What is the price of the option if it is an American call? What is the price of the option if it is...
Problem 1. 1. Calculate the price of a six-month European put option on a non-dividend-paying stock...
Problem 1. 1. Calculate the price of a six-month European put option on a non-dividend-paying stock with an exercise price of $90 when the current stock price is $100, the annualized riskless rate of interest is 3%, and the volatility is 40% per year. 2. Calculate the price of a six-month European call option with an exercise price on this same stock a non-dividend-paying stock with an exercise price of $90. Problem 2. Re-calculate the put and call option prices...
Problem 4.2 (15.30 in Hull) Consider an option on a non-dividend-paying stock when the stock price...
Problem 4.2 (15.30 in Hull) Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5%, the volatility is 25% per annum, and the time to maturity is 4 months. (a) what is the price of the option is it is a European call? (b) what is the price of the option if it is an American call? (c) what is the price of the option if...
Briefly explain why it is not optimal to exercise an American call option on a non-dividend...
Briefly explain why it is not optimal to exercise an American call option on a non-dividend paying stock before the expiration date.
The price of a European call option on a non-dividend-paying stock with a strike price of...
The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6. The stock price is $51, the continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year. What is the price of a one-year European put option on the stock with a strike price of $50? $2.09 $7.52 $3.58 $9.91
Please shown in steps，thank you！ QUESTION 16 Consider an option on a non-dividend paying stock when...
Please shown in steps，thank you！
QUESTION 16 Consider an option on a non-dividend paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5%, the volatility is 25% per annum, and the time to maturity is four months. What is the price of the option if it is a European call? QUESTION 17 Use the same information as in the previous question. What is the price of the option if it is...
(b) A 6-month European call option on a non-dividend paying stock is cur- rently selling for $3. The stock price is...
(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.
A call option on a non-dividend-paying stock has a market price of $2. The stock price...
A call option on a non-dividend-paying stock has a market price of $2. The stock price is $15, the exercise price is $13, the time to maturity is three months, and the risk-free interest rate is 5% per annum. What is the implied volatility?
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the...
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the stock price is $33, the strike price is $36, the risk-free rate is 6% per annum, the volatility is 25% per annum and the time to maturity is 6 months. (a) Calculate u and d for a one-step binomial tree. (b) Value the option using a non arbitrage argument. (c) Assume that the option is a put instead of a call. Value the option...
*25. Explain why an American call option on a non-dividend-paying stock always has the same price as its European counterpart.
Problem 4.2 (15.30 in Hull) Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5%, the volatility is 25% per annum, and the time to maturity is 4 months. (a) what is the price of the option is it is a European call? (b) what is the price of the option if it is an American call? (c) what is the price of the option if...
Please shown in steps，thank you！
QUESTION 16 Consider an option on a non-dividend paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5%, the volatility is 25% per annum, and the time to maturity is four months. What is the price of the option if it is a European call? QUESTION 17 Use the same information as in the previous question. What is the price of the option if it is...
(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.
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the stock price is $33, the strike price is $36, the risk-free rate is 6% per annum, the volatility is 25% per annum and the time to maturity is 6 months. (a) Calculate u and d for a one-step binomial tree. (b) Value the option using a non arbitrage argument. (c) Assume that the option is a put instead of a call. Value the option...
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