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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.

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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:

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