Question

Question 3. Consider a six-month European call option on a stock index. The current value of the index is 1,200, the strike price is 1,250, the risk-free rate is 5%. The index volatility is 20%.

Calculate: a) the value of the option

b) the delta of the option

c) the gamma of the option

d) the theta of the option

e) the vega of the option

f) the rho of the option

assume q = 0.

Answer 1

Black Scholes Model:

We will have to use the professional Bloomberg calculator for this.

Please see the screen shot. Your answers are available in the output section, sequentially:

Hope this helps.