
1. Suppose that you are in the Black-Scholes world. Find the fair price forward contract on...
We are in a Black and Scholes world. A stock today has a price of 100. The discretely compounded one-year risk-free interest rate is 0.05. A European put on this stock with a strike price of 100 that expires in one year has a price of 8.893. What is the price of a European call on this stock with a strike price of 110, which expires in one year? Report in two digits behind the comma, i.e. 0.345 +0.35.
5. Use the Black-Scholes methodology to find, by direct calculation, an explicit formula for the fair price (at time t) of the following contingent claims (European type options). The price of the underlying (stock) at time t is denoted by S(0); the time of maturity by T; the risk-free interest rate by r; the volatility of the underlying by o (a) The stock or nothing call option: This is a claim that will pay exactly the price of the underlying...
We are in a Black and Scholes world. A stock today has a price of 100 with a return volatility of 0.2. The discretely compounded one-year risk-free interest rate is 0.05. What is the price of a European put with a strike price of 110, which expires in one year? Report in two digits behind the comma, i.e. 0.345 = 0.35.
Assume the Black-Scholes framework. The 1-year futures price for stock LMN is $270. The volatility is 30%, and the interest rate is 4%. What is the price of a 280-strike call option price on the LMN futures contract, expiring 9 months from today?
Use Black-Scholes formula to find the price of 1-year call option with strike price of X=$110 if the current stock price is S=100, the standard deviation of annual stock return is 16.9014%, and risk-free interest rate is 7%. You may want to use Excel to do you calculations. Note that Excel function NORM.S.DIST(x,TRUE) is the cumulative distribution function of x for standard Normal (i.e., with mean 0 and standard deviation of 1) distribution.
Assume the Black-Scholes framework for options pricing. You are a portfolio manager and already have a long position in Apple (ticker: AAPL). You want to protect your long position against losses and decide to buy a European put option on AAPL with a strike price of $180.15 and an expiration date of 1-year from today. The continuously compounded risk free interest rate is 8% and the stock pays no dividends. The current stock price for AAPL is $200 and its...
Use the black scholes methodology to find an explicit formula for the fair price at time t of a contingent claim of which payoff at maturity T is sqrt(St), where St denotes the price of underlying at Time T
Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $31, (2) strike price is $34, (3) time to expiration is 8 months, (4) annualized risk-free rate is 5%, and (5) variance of stock return is 0.36. Do not round intermediate calculations. Round your answer to the nearest cent.
Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $30, (2) strike price is $37, (3) time to expiration is 6 months, (4) annualized risk-free rate is 6%, and (5) variance of stock return is 0.36. Do not round intermediate calculations. Round your answer to the nearest cent.
Use the Black-Scholes Model to find the price for a call option with the following inputs: (1) current stock price is $31, (2) strike price is $35, (3) time to expiration is 3 months, (4) annualized risk-free rate is 6%, and (5) variance of stock return is 0.16. Do not round intermediate calculations. Round your answer to the nearest cent.