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3.5 In the Black-Scholes option pricing model, value of an option decreases, all else equal, as...
To compute the value of a put using the Black-Scholes option pricing model, you: A) subtract...
To compute the value of a put using the Black-Scholes option pricing model, you: A) subtract the value of an equivalent call from 1.0. B) have to compute the value of the put as if it is a call and then apply the put-call parity formula. C) subtract the value of an equivalent call from the market price of the stock. D) assume the equivalent call is worthless and then apply the put-call parity formula. E) multiply the value of...
Question 1 Consider the derivation of the Black-Scholes model of option pricing. Let S=S(t) be the...
Question 1 Consider the derivation of the Black-Scholes model of option pricing. Let S=S(t) be the underlying stock price at time t and let f=f(S, t) be the option price at time t. a) Write down the value P of the portfolio defined in the Black-Scholes model. [2 marks] b) Use Itô’s lemma to find an expression for the change Δf in the discrete time Δt. [5 marks] c) Use the expression you have found in point b) to find...
In referring to the Black-Scholes formula for pricing a European put option on a dividend paying...
In referring to the Black-Scholes formula for pricing a European put option on a dividend paying stock, which of the following statements are true? I. The put price increases as the strike decreases II. The put price increases as volatility increases III. The put price increases as the dividend decreases a) I only c) I and II e) I, II and III b) Il only d) II and III
1. What is the value of the following call option according to the Black Scholes Option...
1. What is the value of the following call option according to the Black Scholes Option Pricing Model? What is the value of the put options? Stock Price = $42.50 Strike Price = $45.00 Time to Expiration = 3 Months = 0.25 years. Risk-Free Rate = 3.0%. Stock Return Standard Deviation = 0.45.
Use the Black-Scholes model to find the value for a European put option that has an...
Use the Black-Scholes model to find the value for a European put option that has an exercise price of $62.00 and four months to expiration. The underlying stock is selling for $64.00 currently and pays an annual dividend of $1.17. The standard deviation of the stock’s returns is 0.09 and risk-free interest rate is 2.5%. (Round intermediary calculations to 4 decimal places. Round your final answer to 2 decimal places.) Put value $
Use the Black-Scholes model to find the value for a European put option that has an...
Use the Black-Scholes model to find the value for a European put option that has an exercise price of $62.00 and four months to expiration. The underlying stock is selling for $63.50 currently and pays an annual dividend of $1.77. The standard deviation of the stock’s returns is 0.19 and risk-free interest rate is 4.5%. (Round intermediary calculations to 4 decimal places. Round your final answer to 2 decimal places.) ($1.88 is incorrect) Put value $
B. decreases by approximately 4.3%. C. decreases by approximately $1.72. Answer C The put option will...
B. decreases by approximately 4.3%. C. decreases by approximately $1.72. Answer C The put option will decrease in value as the underlying stock price increases: -0.43 x S4 S1.72. 100,000 Stocks Call Option sold has the following details. The stock price is $49, the strike price is $50, the risk-free rate is 5%, the stock price volatility is 20%, and the time to exercise is 20 weeks or 20/52 year. Table below shows Delta, Gamma, Vega, Theta and Rho for...
Problem 2. You are given the following data assuming a Black-Scholes model. • S = $100...
Problem 2. You are given the following data assuming a Black-Scholes model. • S = $100 • 0 = 30% • p = 0.08 • S= 0 Suppose you sell a 95-strike put with 3 months to expiration. (i) (5 points) What is the gamma of this put option? (ii) (3 points) If the underlying were to decrease by $1 over the next short while, what effect would that have on this option's delta? (iii) (2 points) If all of...
In the use of the Black-Scholes option valuation model to determine the value of a European...
In the use of the Black-Scholes option valuation model to determine the value of a European call option, which one of the following relationships is NOT correct? A. An increase in the risk-free rate increases the value of the European call option. B. An increase in the exercise price of the European call option increases the value of the option. C. An increase in the price of the underlying stock increases the value of the European call option. D. An...
Black Scholes Option Pricing Model Stock Price = 75 Strike price = 70 Risk Free rate...
Black Scholes Option Pricing Model Stock Price = 75 Strike price = 70 Risk Free rate - 4% Standard deviation = 15% 5 months remaining Calculate call & Put and show work please
To compute the value of a put using the Black-Scholes option pricing model, you: A) subtract the value of an equivalent call from 1.0. B) have to compute the value of the put as if it is a call and then apply the put-call parity formula. C) subtract the value of an equivalent call from the market price of the stock. D) assume the equivalent call is worthless and then apply the put-call parity formula. E) multiply the value of...
In referring to the Black-Scholes formula for pricing a European put option on a dividend paying stock, which of the following statements are true? I. The put price increases as the strike decreases II. The put price increases as volatility increases III. The put price increases as the dividend decreases a) I only c) I and II e) I, II and III b) Il only d) II and III
B. decreases by approximately 4.3%. C. decreases by approximately $1.72. Answer C The put option will decrease in value as the underlying stock price increases: -0.43 x S4 S1.72. 100,000 Stocks Call Option sold has the following details. The stock price is $49, the strike price is $50, the risk-free rate is 5%, the stock price volatility is 20%, and the time to exercise is 20 weeks or 20/52 year. Table below shows Delta, Gamma, Vega, Theta and Rho for...
Problem 2. You are given the following data assuming a Black-Scholes model. • S = $100 • 0 = 30% • p = 0.08 • S= 0 Suppose you sell a 95-strike put with 3 months to expiration. (i) (5 points) What is the gamma of this put option? (ii) (3 points) If the underlying were to decrease by $1 over the next short while, what effect would that have on this option's delta? (iii) (2 points) If all of...
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