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1. (Put-call parity) A stock currently costs So per share. In each time period, the value...
1. (Put-call parity) A stock currently costs So per share. In each time period, the value...
1. (Put-call parity) A stock currently costs So per share. In each time period, the value of the stock will either increase or decrease by u and d respectively, and the risk-free interest rate is r. Let Sn be the price of the stock at t-n, for O < n < N, and consider three derivatives which expire at t - V, a cal option Voll-(SN-K)+, a put option VNut-(X-Sy)+, and a forward option VN(SN contract FN SN N) ,...
5. Consider the 3-period binomial model with So 100, u 2, dand r-1. (a) What is...
5. Consider the 3-period binomial model with So 100, u 2, dand r-1. (a) What is the current price of a lookback call option with a strike price of $100 that pays off (at time three) V3- max Sn - 100 Sn3 (b) What is the time-zero price of a lookback put option with a strike price of $100 that pays off (at time three) V 100-min Sn OSnK3 (c) What is the time-zero price of an Asian call option...
6. A stock currently costs $4 per share. In each time period, the value of th<e...
6. A stock currently costs $4 per share. In each time period, the value of th<e stock will either increase or decrease by 50%, and the risk-free interest rate is r 1/10. Let So, Si, and S2 be the prices of the stock at times 0, 1, and 2, and suppose we are selling a European-style call option expiring at time 2, with a strike price of vS1S2. That is, the value of the option at time 2 is (S2-VS152)+....
6. A stock currently costs $4 per share. In each time period, the value of th<e...
6. A stock currently costs $4 per share. In each time period, the value of th<e stock will either increase or decrease by 50%, and the risk-free interest rate is r 1/10. Let So, Si, and S2 be the prices of the stock at times 0, 1, and 2, and suppose we are selling a European-style call option expiring at time 2, with a strike price of vS1S2. That is, the value of the option at time 2 is (S2-VS152)+....
3. (10 pts) For each k e [0, 1,2,..., 301 the symbol S(k) denotes the price of the stock at time k. A European call option with strike 90 and expiration n- 30 costs 15. A European put option with...
3. (10 pts) For each k e [0, 1,2,..., 301 the symbol S(k) denotes the price of the stock at time k. A European call option with strike 90 and expiration n- 30 costs 15. A European put option with strike 100 and expiration 30 costs 11. Both options have the same stock as their underlying security. What is the price of the security whose payoff structure is 7S (30) 630, if S(30) 100, S(30)-30, if 90 S(30) S 100,...
Question 7: 1. Both a call option and a put option are currently traded on stock...
Question 7:
1. Both a call option and a put option are currently traded on stock AXT. Both options have a strike price of $90 and maturity (T) of three months. The call premium (Co) is $2.75, the put premium (Po) is $4.12, and the underlying stock price (So) is $89.50. Assume that you trade one contract that has 100 shares when you calculate profit or loss. What will be your profit (or loss) if you take a long position...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000 1020 84.470 101.214 1050 1107 137.167 I 1) Suppose you invest in the S&P stock index for $1000, buy a 950-strike put, and sell a 1050- strike call. Draw a profit diagram for this position. What is the net option premium? 2) Here is a quote from an investment website about an investment strategy using options: One strategy investors apply is a "synthetic stock."...
g) European call with a strike price of $40 costs $7. European put with the same...
g) European call with a strike price of $40 costs $7. European put with the same strike price and expiration date costs $6. Assume that you buy two calls and one put (strap strategy). Sketch the graph and write down functions of payoff and profit h) Consider a stock with a price of $50 and there is European put option on that stock with the strike of $55 and premium of $4. Assume that you buy 1/3 of a stock...
Problem 22-6 Put-Call Parity A stock is currently selling for $73 per share. A call option...
Problem 22-6 Put-Call Parity A stock is currently selling for $73 per share. A call option with an exercise price of $77 sells for $3.65 and expires in three months. If the risk-free rate of interest is 3.3 percent per year, compounded continuously, what is the price of a put option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Put price
A stock is currently selling for $75 per share. You could purchase a call with a...
A stock is currently selling for $75 per share. You could purchase a call with a strike price of $70 for $7. You could purchase a put with a strike price of $70 for $2. Calculate the intrinsic value of the call option. Calculate the time value of the call option. Calculate the intrinsic value of the put option. Calculate the time value of the put option.
1. (Put-call parity) A stock currently costs So per share. In each time period, the value of the stock will either increase or decrease by u and d respectively, and the risk-free interest rate is r. Let Sn be the price of the stock at t-n, for O < n < N, and consider three derivatives which expire at t - V, a cal option Voll-(SN-K)+, a put option VNut-(X-Sy)+, and a forward option VN(SN contract FN SN N) ,...
5. Consider the 3-period binomial model with So 100, u 2, dand r-1. (a) What is the current price of a lookback call option with a strike price of $100 that pays off (at time three) V3- max Sn - 100 Sn3 (b) What is the time-zero price of a lookback put option with a strike price of $100 that pays off (at time three) V 100-min Sn OSnK3 (c) What is the time-zero price of an Asian call option...
6. A stock currently costs $4 per share. In each time period, the value of th<e stock will either increase or decrease by 50%, and the risk-free interest rate is r 1/10. Let So, Si, and S2 be the prices of the stock at times 0, 1, and 2, and suppose we are selling a European-style call option expiring at time 2, with a strike price of vS1S2. That is, the value of the option at time 2 is (S2-VS152)+....
6. A stock currently costs $4 per share. In each time period, the value of th<e stock will either increase or decrease by 50%, and the risk-free interest rate is r 1/10. Let So, Si, and S2 be the prices of the stock at times 0, 1, and 2, and suppose we are selling a European-style call option expiring at time 2, with a strike price of vS1S2. That is, the value of the option at time 2 is (S2-VS152)+....
3. (10 pts) For each k e [0, 1,2,..., 301 the symbol S(k) denotes the price of the stock at time k. A European call option with strike 90 and expiration n- 30 costs 15. A European put option with strike 100 and expiration 30 costs 11. Both options have the same stock as their underlying security. What is the price of the security whose payoff structure is 7S (30) 630, if S(30) 100, S(30)-30, if 90 S(30) S 100,...
Question 7:
1. Both a call option and a put option are currently traded on stock AXT. Both options have a strike price of $90 and maturity (T) of three months. The call premium (Co) is $2.75, the put premium (Po) is $4.12, and the underlying stock price (So) is $89.50. Assume that you trade one contract that has 100 shares when you calculate profit or loss. What will be your profit (or loss) if you take a long position...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000 1020 84.470 101.214 1050 1107 137.167 I 1) Suppose you invest in the S&P stock index for $1000, buy a 950-strike put, and sell a 1050- strike call. Draw a profit diagram for this position. What is the net option premium? 2) Here is a quote from an investment website about an investment strategy using options: One strategy investors apply is a "synthetic stock."...
g) European call with a strike price of $40 costs $7. European put with the same strike price and expiration date costs $6. Assume that you buy two calls and one put (strap strategy). Sketch the graph and write down functions of payoff and profit h) Consider a stock with a price of $50 and there is European put option on that stock with the strike of $55 and premium of $4. Assume that you buy 1/3 of a stock...
Problem 22-6 Put-Call Parity A stock is currently selling for $73 per share. A call option with an exercise price of $77 sells for $3.65 and expires in three months. If the risk-free rate of interest is 3.3 percent per year, compounded continuously, what is the price of a put option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Put price
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