You build a binomial model with one period and assert that over the course of a year the stock price will either rise by...
You build a binomial model with one period and assert that over the course of a year the stock price will either rise by a factor of 1.5 or fall by a factor of ⅔. What is your implicit assumption about the volatility of the stock's rate of return over the next year? please SHOW working out
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You build a binomial model with one period and assert that over the course of a year the stock price will either rise by...
imagine that googles stock price will either rise by one third or fall by 25% over...
imagine that googles stock price will either rise by one third or fall by 25% over the next six months. Assume the 6 month risk free interest rate is 1%. Both the stock price amd the excersie price are $530. 1. Calculate the value of the 6 month call option using the replicating porfolio method 2. Calculate the value of the 6 month call option using the risk neutral method.
The current price of the common stock of Internet Enterprises is $100. Over the course of...
The current price of the common stock of Internet Enterprises is $100. Over the course of a year, the stock's price will either increase by 100% or decrease by 50%. The stock pays no dividends. The current prices of one-period and two period zero coupon risk free bonds are $909.09 and $826.45 respectively ($1000 face value and the period here is 6 months). A special European option has recently been created on the common stock of Internet with the following...
1.2. You have a stock in the one-period binomial model such that So and r= 4,...
1.2. You have a stock in the one-period binomial model such that So and r= 4, S1(H) = 8, S, (T) = 2, 1.5. (a) Show that this setup violates the no-arbitrage assumption. (b) Show that there is a portfolio in the one-period model such that Xo X1 > 0. Such a portfolio is an example of arbitrage extraction. 0, Ao #0, and %3D 1.3. With the same stock as in problem 1.2 but with r = 0.25, suppose that...
Consider the following one-period binomial model for stock price. At t = 0 the stock price...
Consider the following one-period binomial model for stock price. At t = 0 the stock price is $80 and at t = 1 (t is in years) it could be $70 with probability p > 0 and $y with probability 1 − p. The interest rate is assumed to be 8%. (1) Determine the range of values for y that precludes arbitrage in this model. (2) Assume that y = $83. Construct an arbitrage strategy for this model.1
Binomial option pricing model A stock currently trades for $41. In one month, the price will either be $47 or $34. The a...
Binomial option pricing model A stock currently trades for $41. In one month, the price will either be $47 or $34. The annual risk-free rate is 6%; assume daily interest compounding and 365 days per year. The value of a one-month call option with an exercise price of $39 is $______.
A stock sells for $25. Over the next 3 months you believe the stock will either...
A stock sells for $25. Over the next 3 months you believe the stock will either increase to $30 or decrease to $20.The annual risk-free rate is 4%.Use the binomial option pricing model and find the price of a 3-month call option with a strike of $24.What is the Delta of the option?
Suppose IBM's stock price is currently $100. In the next year it will either fall to...
Suppose IBM's stock price is currently $100. In the next year it will either fall to $70 or rise to $130. What is the price today of a one-year European call option on IBM with an exercise price of 100? The one-year risk-free interest rate is 2% per year. 6 10 0 15.69
Binomial option pricing model A stock currently trades for $41. In one month, the price will...
Binomial option pricing model A stock currently trades for $41. In one month, the price will either be $50 or $36. The annual risk-free rate is 6%; assume daily interest compounding, and 365 days per year. The value of a one-month call option with an exercise price of $39 is $______.
The current price of Estelle Corporation stock is $ 25.00. In each of the next two years, this stock price will either go up by 23 % or go down by 23 %. The stock pays no dividends. The one-year ris...
The current price of Estelle Corporation stock is $ 25.00. In each of the next two years, this stock price will either go up by 23 % or go down by 23 %. The stock pays no dividends. The one-year risk-free interest rate is 5.3 % and will remain constant. Using the Binomial Model, calculate the price of a one-year put option on Estelle stock with a strike price of $ 25.00.
NEED HELP WITH ALL QUESTIONS PLEASE!!!!! 14. Consider a one period binomial model. The initial stock...
NEED HELP WITH ALL QUESTIONS PLEASE!!!!!
14. Consider a one period binomial model. The initial stock price is $30. Over the next 3 months, the stock price could either go up to $36 (u = 1.2) or go down to $24 (d = 0.8). The continuously compounded interest rate is 6% per annum. Use this information to answer the remaining questions in this assignment. Consider a call option whose strike price is $32. How many shares should be bought or...
1.2. You have a stock in the one-period binomial model such that So and r= 4, S1(H) = 8, S, (T) = 2, 1.5. (a) Show that this setup violates the no-arbitrage assumption. (b) Show that there is a portfolio in the one-period model such that Xo X1 > 0. Such a portfolio is an example of arbitrage extraction. 0, Ao #0, and %3D 1.3. With the same stock as in problem 1.2 but with r = 0.25, suppose that...
Suppose IBM's stock price is currently $100. In the next year it will either fall to $70 or rise to $130. What is the price today of a one-year European call option on IBM with an exercise price of 100? The one-year risk-free interest rate is 2% per year. 6 10 0 15.69
NEED HELP WITH ALL QUESTIONS PLEASE!!!!!
14. Consider a one period binomial model. The initial stock price is $30. Over the next 3 months, the stock price could either go up to $36 (u = 1.2) or go down to $24 (d = 0.8). The continuously compounded interest rate is 6% per annum. Use this information to answer the remaining questions in this assignment. Consider a call option whose strike price is $32. How many shares should be bought or...
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