Homework Answers
American call option formula: Ct = [ St - K. e EXP( -r*T) ]
St= Stock price, K = strike price, r= risk free rate of return, T= maturity date of option
={50-49e(-0.05*0.5)}
= 50-133.17=-83.17
Designing Weather Index for agricultural commodities means estimating weather and commodity derivatives price co-relation.
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2.2 Given: S(0)-50; r= 0.05, T-6 months; K = 49. What is a lower bound for...
Problem1 A stock is currently trading at S $40, during next 6 months stock price will increase to $44 or decrease to $32-6-month risk-free rate is rf-2%. a. [4pts) What positions in stock and T-...
Problem1 A stock is currently trading at S $40, during next 6 months stock price will increase to $44 or decrease to $32-6-month risk-free rate is rf-2%. a. [4pts) What positions in stock and T-bills will you put to replicate the pay off of a European call option with K = $38 and maturing in 6 months. b. 1pt What is the value of this European call option? Problem 2 Suppose that stock price will increase 5% and decrease 5%...
Problem1 A stock is currently trading at S $40, during next 6 months stock price will increase to $44 or decrease to $32-6-month risk-free rate is rf-2%. a. [4pts) What positions in stock and T-bills will you put to replicate the pay off of a European call option with K = $38 and maturing in 6 months. b. 1pt What is the value of this European call option? Problem 2 Suppose that stock price will increase 5% and decrease 5%...
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