Question
Show that an at the money call option on an underlying asset paying dividends continuously at...
Show that an at the money call option on an underlying asset paying
dividends continuously at rate
is worth more than an at the money put option with the same
maturity if and only
if
, where
is the constant risk free rate. Hints: Put-Call parity,
Black-Scholes formula.
Homework Answers
Answer #1
Not the answer you're looking for?
Similar Questions
A call option has 20 days to mature. The continuously compounded annual risk free rate is...
A call option has 20 days to mature. The continuously compounded
annual risk free rate is 1%. The stock price is 28.40. The exercise
price is 29. The annualized volatility is 0.27. Dividend yield is
zero. What is the delta of this option? What is the Black-Scholes
put price for the data of above question?
You are evaluating a European call option on a no-dividend paying stock that is currently priced...
You are evaluating a European call option on a no-dividend
paying stock that is currently priced $42.05. The strike price for
the option is $45, the risk-free rate is3% per year, the volatility
is 18% per year, and the time to maturity is eleven months. Use the
Black-Scholes model to determine the price of the option.
You are given the following information about a European call option on Stock XYZ. Use the...
You are given the following information about a European call
option on Stock XYZ. Use the Black-Scholes model to determine the
price of the option:
Shares of Stock XYZ currently trade
for 90.00.
The stock pays dividends continuously
at a rate of 3% per year.
The call option has a strike price of
95.00 and one year to expiration.
The annual continuously compounded
risk-free rate is 6%.
It is known that d1 – d2 = .3000;
where d1 and d2...
3.3 In the Black-Scholes option-pricing model, if volatility increases, the value of a call option will...
3.3 In the Black-Scholes option-pricing model, if volatility
increases, the value of a call option will increase but the value
of the put option will decrease. (True / False)
3.4 The Black-Scholes option pricing model assumes which of the
following?
Jumps in the underlying price
Constant volatility of the underlying
Possibility of negative underlying price
Interest rate increasing as option nears expiration
Consider a European call option and a European put option on a non dividend-paying stock. The...
Consider a European call option and a European put option on a
non dividend-paying stock. The price of the stock is $100 and the
strike price of both the call and the put is $104, set to expire in
1 year. Given that the price of the European call option is $9.47
and the risk-free rate is 5%, what is the price of the European put
option via put-call parity?
Use the Black-Scholes formula to value the following options: a. A Call option written on a...
Use the Black-Scholes formula to value the following
options:
a. A Call option written on a stock selling for $100 per share
with a $110 exercise price. The stock's standard deviation is 15%
per quarter. The option matures in three months. The risk free
interest is 3% per quarter.
b. A put option written on the same stock at the same time, with
the same exercise price and expiration date.
Now for each of these options find the combination of...
Assume risk-free rate is 5% per annum continuously compounded. Use Black-Scholes formula to find the price...
Assume risk-free rate is 5% per annum continuously compounded.
Use Black-Scholes formula to find the price the following
options:
European call with strike price of $72 and one year to maturity
on a non-dividend-paying stock trading at $65 with volatility of
40%.
European put with strike price of $65 and one year to maturity
on a non-dividend-paying stock trading at $72 with volatility of
40%
What is the price of a European put option on a non-dividend-paying stock when the stock...
What is the price of a European put option on a
non-dividend-paying stock when the stock price is $100, the strike
price is $100, the risk-free interest rate is 8% per annum, the
volatility is 25% per annum, and the time to maturity is 1 month?
(Use the Black-Scholes formula.)
Price a European call option on non-dividend paying stock by using a binomial tree. Stock price...
Price a European call option on non-dividend paying stock by
using a binomial tree. Stock price is €50, volatility is 26%
(p.a.), the risk-free interest rate is 5% (p.a. continuously
compounded), strike is € 55, and time to expiry is 6 months. How
large is the difference between the Black-Scholes price and the
price given by the binomial tree?
Price a European call option on non-dividend paying stock by using a binomial tree. Stock price...
Price a European call option on non-dividend paying stock by
using a binomial tree. Stock price is €50, volatility is 26%
(p.a.), the risk-free interest rate is 5% (p.a. continuously
compounded), strike is € 55, and time to expiry is 6 months. How
large is the difference between the Black-Scholes price and the
price given by the binomial tree?
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 5 minutes ago
asked 17 minutes ago
asked 30 minutes ago
asked 43 minutes ago
asked 59 minutes ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 2 hours ago