Question

Project 3. Options: Valuation In this project you wll apply material on option valuation of option positions. You may work individually or in a group of two. file ort with other 10 ro groups. Due date: Wednesday, May 22 a 1:59 p.m. No projects will be accepted after the due date. Please reach out if you need help with the project. Option Valuation BlackBoard. Use the S&P 500 index options data for April 3, 2014 posted on . Calculate the time to expiration of May 2014 SPX options as of the market close on April 3, 2014. These options expire on May 3, 2014 2. Obtain from http://finance.yahoo.com/ the historical values of the S&P 500 index (GSPC) from January 2, 2014 to April 3 2014. Use daily closing prices adjusted for stock splits and dividends to compute returns. Using this sample of returns, estimate the S&P 500 index volatility as the sample standard deviation of returns 3. Use the binomial OPM with 30 periods to price the May 2014 SPX call and put with a strike price of 1890 (Note: the number of periods is independent to the days to expiration Assume the following . The dividend yield on the S&P 500 index is 2.02% per year The riskless interest rate (one-month LIBOR) for April 3, 2014 is 0-15% per year SPX (S&P 500 INDEX) VIX (CBOE MARKET VOLATILITY Apr 03, 2014@1649 ET Chan Bid Ask Vel Open Int Last SaleNet Bid Ask Vol Open Int 114 May 180000 SPAW140201800-E 114 May 1805.00 SPXWI4001805-F 114 May 181000 SPXWI40201810-E 14 May 181500 SPXW140201815- 014 May 182000 SPXW140201820.E 0 14 May 18200 SPXW1402018S- 8 14 May 1830.00 SPXW140201830-E 24 14 May 1835.00 SPXW1400188-F 19 14 May 1840.00SPAWI40001840- 12 14 May 1845.00 SPXW1407014S-E 6 14 May 1850.00 SPAW4001850-E 14 14 May 1855.00 SPXW140201855-E 3.8 42.7 444 391163 14 May 1860.00 SPXW14020 1860- | 6114 May 1865.00 SXwi4020156SE 178 14 May 1870,00SPXW140201870E 323 33.8 1631722 14 May 1875.00 SPXW140201875-E 660 14 May 1880.00 SPXWI40701880E 1.75 26.1 26.7 2798138 14 May 1885.00 SXW018E 23 14 May 1890.00 SPXW140201890-E 608 14 May 1895.00 SPAWI40201895E 190 14 May 1900.00 SPXW40201900- 1.81 13.62303 14 May 1908.00 SPXW14020190S- .15 13.3 13.8 504 4327 14 May 1910.00 SPXW140201910-E 0.2 11.3 118 2091561 14 May 1915.00 SPXW140201915- 1702 14 May 1920.00 SPXW140201920-E 0.54 7.8 8.43650 1371 14 May 1925.00 SPXW14020192S- 183 14 May 1930.00 SPXWI40201910 E 63 14 May 1935.00 SPXW140201935- 0.35 4.3 48 10696 7691 14 May 1940.00 SPXW14M01940 42 14 May 1945.00SPXW140201945-E 72 14 May 1950.00 SPXW140201950-F 171 14 May 1953.00 SPXW140201935- 514 14 May 1960.00 SAw140201960-E 3 135 1825483 14 May 1965.00 SPXW 40201965- 0.03 1.25 5 489 2319 14 May 1970.00 SPXW140201970-F 684 14 May 1975.00 SPXWI40201975 357 14 May 1980.00 SPXWI40201980-E 63 14 May 1985.00SPXW140201985E 24 14 May 1990,00SPXW140201990-E 4 14 May 1995.00SPXW140201995E 38 14 May 2000.00 SPXW140202000- 0 14 May 2005.00 SPXWI40202005-E 19 14 May 2010.00 SPXW140702010- 20 14 May 20 15.00 SPxw140202015-E O 14 May 2020.00 SPXW 140202020-E 0 14 May 202.00 SPXW140202025- 1114 May 2030.00 SPXW14020200- 10 14 May 2050.00 SPXW140202030- 90 14 May 2075.00SPXW140202075-E 0.1 54 5.8861 5.93 -0.97 5.9 6.3 9.1 836 86 200 6.9 3.7 64 6.8252 8.38 -0,62 82 8.6 9.6 0.7 9 94 2889 0.35 -00 9.6 1020S 12.6-0 12.6 13 4.3 -0.3 14.9 15.4 60 .5195 163 16.7 128 19.5 0.24 194 199 251 23.2 0.323 23.6 14 149 1.77 23.3 23.9 212 25.6 0.8 24.9 25.515 15 20.4 21 184 2.88 17.9 18.5 3.117.4 40.4 42.4 80 1 025 2.9 3.354 0,02 235 2.63 43 92.3 085 05 151 2 045 0.65 0103 110.8 122.9130.8 137.7 145.6

Answer 1

Answer 1 - The date of expiration of SPX Option is 3rd Friday of the months, so date of expiration of May 14 SPX Option will be 16 May, 2014.