Question

LetthepricesofanEuropeancallandputoptionswiththesamestrikepriceKandthesamematurity date T, at current time t, be c and p respectively. The current price of...

  1. LetthepricesofanEuropeancallandputoptionswiththesamestrikepriceKandthesamematurity date T, at current time t, be c and p respectively. The current price of the stock is S. The risk free interest rate is r . Use the put–call parity relationship to derive the relationship between:

    (a) ThedeltaofanEuropeancallandthedeltaofanEuropeanput.

    (b) The gamma of an European call and the gamma of an European put. What is meant by the gamma of an option position?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Question 1. Given the price of a stock is $21, the maturity time is 6 months,...
Question 1. Given the price of a stock is $21, the maturity time is 6 months, the strike price is $20 and the price of European call is $4.50, assuming risk-free rate of interest is 3% per year continuously compounded, calculate the price of the European put option? Hint: Use put-call parity relationship. Note: Bull spreads are used when the investor believes that the price of stock will increase. A bull spread on calls consists of going long in a...
The current price of a stock is $50 and the annual risk-free rate is 6 percent....
The current price of a stock is $50 and the annual risk-free rate is 6 percent. A call option with an exercise price of $55 and one year until expiration has a current value of $7.20. What is the value of a put option (to the nearest dollar) written on the stock with the same exercise price and expiration date as the call option? (Use put-call parity)
You are considering purchasing a call option on a stock with a current price of $31.59....
You are considering purchasing a call option on a stock with a current price of $31.59. The exercise price is $33.1, and the price of the corresponding put option is $3.81. According to the put-call parity theorem, if the risk-free rate of interest is 1.6% and there are 45 days until expiration, what is the value of the call? (Hint: Use 365 days in a year.)
You are considering purchasing a put option on a stock with a current price of $54....
You are considering purchasing a put option on a stock with a current price of $54. The exercise price is $56, and the price of the corresponding call option is $4.05. According to the put-call parity theorem, if the risk-free rate of interest is 5% and there are 90 days until expiration, the value of the put should be
Suppose that a 6-month European call A option on a stock with a strike price of...
Suppose that a 6-month European call A option on a stock with a strike price of $75 costs $5 and is held until maturity, and 6-month European call B option on a stock with a strike price of $80 costs $3 and is held until maturity. The underlying stock price is $73 with a volatility of 15%. Risk-free interest rates (all maturities) are 10% per annum with continuous compounding. Use put-call parity to explain how would you construct a European...
A stock’s current price S is $100. Its return has a volatility of s = 25...
A stock’s current price S is $100. Its return has a volatility of s = 25 percent per year. European call and put options trading on the stock have a strike price of K = $105 and mature after T = 0.5 years. The continuously compounded risk-free interest rate r is 5 percent per year. The Black-Scholes-Merton model gives the price of the European put as: please provide explanation
PLEASE SOLVE THE B. (Option valuation) A stock price is currently 40€. It is known that...
PLEASE SOLVE THE B. (Option valuation) A stock price is currently 40€. It is known that at the end of 1 month it will be either 42€ or 38€. The risk-free interest rate is 8% per annum with continuous compunding. a. What is the value of a 1-month European call option with a strike price of 39€? = 1,69€ b. USE PUT-CALL PARITY TO SOLVE THE VALUATION OF THE CORRESPONDING PUT OPTION.
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?  
Question 34 Black-Scholes Option-Pricing S 45 Current stock price X 50 Exercise price r 5.00% Risk-free...
Question 34 Black-Scholes Option-Pricing S 45 Current stock price X 50 Exercise price r 5.00% Risk-free rate of interest T 9 months Time to maturity of option Variance 6.308% Stock volatility 1. Call option price = 4.63 2. Call option price = 2.83 3. Call option price = 2.93 4. Call option price = 2.63 5. None of Above
Imagine that you are unable to short-sell a particular stock. Using put-call parity, replicate a short...
Imagine that you are unable to short-sell a particular stock. Using put-call parity, replicate a short position in the stock, assuming that the stock pays no dividends, there is a put and a call option, both of which have the same exercise price, K, and the same time to expiration, T. You are able to borrow and lend the continuously compounded risk free rate, r.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT