Question

Please find the price of the put option using the simulated stock prices. The put option...

Please find the price of the put option using the simulated stock prices. The put option matures in 1 year and has exercise price $30. The price of the underlying stock is $30 today. The average annual stock return is 5%. The annualized stock volatility is 15%. The interest rate on the risk-free asset is 5% per year. Please simulate the end of year stock price for 1000 times.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

If we stimulate the stock price for 1000 times it will take normal distribution shape and hence we can apply the Normal distribution to calculate Put option as below:

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
1. Does market price of a put option decrease or increase in the exercise price? 2....
1. Does market price of a put option decrease or increase in the exercise price? 2. Does market price of a put option decrease or increase in the time to expiration? 3. Does market price of a put option decrease or increase in the price of underlying asset?   4. Does market price of a put option decrease or increase in the dividend payouts of underlying asset? 5. Does market price of a put option decrease or increase in the interest...
What are the prices of a call option and a put option with the following characteristics?...
What are the prices of a call option and a put option with the following characteristics? Stock price=$64 Exercise price =$60 Risk-free rate=2.7% per year compounded continuously. Maturity=4 months Stander deviation of =62% per year. Call price? put price?
You are to calculate a put option (European) that has 3 months left to expiration. The...
You are to calculate a put option (European) that has 3 months left to expiration. The underlying stock does NOT pay dividends and both the stock price and exercise price happen to be equal at $50. If the risk free rate is currently 10% per annum, and the volatility is assessed at 30% per annum, what is the price of the European put option?
You are observing the following market prices. A put option that expires in six months with...
You are observing the following market prices. A put option that expires in six months with an exercise price of $45 sells for $5.80. The stock is currently priced at $40, and the risk-free rate is 3.6% per year, compounded continuously. What is the price of a call option with the same exercise prices and maturity? In the above example, suppose you form a portfolio consisting of selling a call option and buying a put option on the same stock....
What are the prices of a call option and a put option with the following characteristics?...
What are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Stock price = $77 Exercise price = $75 Risk-free rate = 3.40% per year, compounded continuously Maturity = 5 months Standard deviation = 59% per year
Find the theoretical fair value of a put option written on a share of stock that...
Find the theoretical fair value of a put option written on a share of stock that is trading at $100 today. The exercise price of the put option is $112. A call option written on that same stock with the same exercise price sells for $3.19. The risk-free rate is 7.7% and both options expire in exactly 16 weeks.
Consider an option on a non-dividend-paying stock when the stock is $ 30, the exercise price...
Consider an option on a non-dividend-paying stock when the stock is $ 30, the exercise price is $29. The risk –free rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. (a) What is the price of the option if it is European call? (b) What is the price of option if it is an American call? (c) What is the price of the option if it is a European put?
What are the prices of a call option and a put option with the following characteristics?...
What are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) Stock price = $76 Exercise price = $75 Risk-free rate = 4.50% per year, compounded continuously Maturity = 4 months Standard deviation = 63% per year   Call price $      Put price $   
A put option with a strike of $100 expires in 3 months. The underlying stock follows...
A put option with a strike of $100 expires in 3 months. The underlying stock follows a binomial process and does not pay dividends. Today, the stock price is $110, and in three months its price will be $125 or $90. The annual Risk free rate is 6%. calculate the fair price of the put option. 4.55, 3.51, 3.77, 4.02, OR 4.28.
You are attempting to value a put option with an exercise price of $102 and one...
You are attempting to value a put option with an exercise price of $102 and one year to expiration. The underlying stock pays no dividends, its current price is $102, and you believe it has a 50% chance of increasing to $121 and a 50% chance of decreasing to $83. The risk-free rate of interest is 10%. Calculate the value of a put option with exercise price $102.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT