A stock is currently priced at $51.00 and pays a dividend yield of 4.3% per annum. The risk-free rate is 5.7% per annum with continuous compounding. In 12 months, the stock price will be either $41.31 or $57.12. Using the binomial tree model, compute the price of a 12 month European call with strike price $50.32.
A stock is currently priced at $51.00 and pays a dividend yield of 4.3% per annum....
A stock is currently priced at $47.00 and pays a dividend yield of 3.7% per annum. The risk-free rate is 5.3% per annum with continuous compounding. In 18 months, the stock price will be either $40.89 or $52.64. Using the binomial tree model, compute the price of a 18 month European call with strike price $48.74.
A stock is currently priced at $52.00. The risk free rate is 4.6% per annum with continuous compounding. In 5 months, its price will be $60.84 with probability 0.57 or $44.72 with probability 0.43. Using the binomial tree model, compute the present value of your expected profit if you buy a 5 month European call with strike price $57.00. Recall that profit can be negative.
A stock is currently priced at $75.00. The risk free rate is 4.5% per annum with continuous compounding. Use a one-time step Cox-Ross-Rubenstein model for the price of the stock in 13 months assuming the stock has annual volatility of 24.9%. Compute the price of a 13 month call option on the stock with strike $80.00.
A non-paying dividend stock price is currently 40 US$. Over each of the next two three-month periods it is expected to go either up by 10% or down by 10%. The riskless interest rate is 12% per annum with continuous compounding. What is the value of a six-month European put option with a strike price of 42 US$? Given the information above find the relevant call and put price of that European non-paying dividend stock option using the Black-Scholes formula
A stock currently trading at $115 pays a $4 dividend in three months and nine months. An option on the stock with an exercise price of $105 expires in ten months. Annualized yield for T-bill for this option is 11% and annualized standard deviation (volatility) of the continuously compounded return on the stock is 17% per annum. 14. A stock currently trading at $115 pays a $4 dividend in three months and nine months. An option on the stock...
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?
Please show all work thank you! (1 point) For all problems in this section, use the binomial tree model. Unless otherwise stated, assume no arbitrage. A stock is currently priced at $45.00. The risk free rate is 4.7% per annum with continuous compounding. In 5 months, its price will be $50.85 with probability 0.58 or $39.15 with probability 0.42. Using the binomial tree model, compute the present value of your expected profit if you buy a 5 month European call...
3. Suppose that the risk-free interest rate is 6% per annum dividend yield on a stock index is 4% per annum. The index is standing at 400, and the futures price for a contract deliverable in four months is 405. What arbitroge opportunities does this create? with continuous compounding and that the
A stock price is currently $40. It is known that at the end of 1 month it will be either $42 or $38. The risk-free interest rate is 8% per annum with continuous compounding. What is the value of a 1-month European call option with a strike price of $39?
Problem 12.25. Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is six months a. Calculate u, d, and p for a two step tree b. Value the option using a two step tree. c. Verify that DerivaGem gives the same answer d. Use DerivaGem to value the option with 5,...