Question

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?

Answer #1

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?

Consider a six-month European call option on a
non-dividend-paying stock. The stock price is $30, the strike price
is $29, and the continuously compounded risk-free interest rate is
6% per annum. The volatility of the stock price is 20% per annum.
What is price of the call option according to the
Black-Schole-Merton model? Please provide you answer in the unit of
dollar, to the nearest cent, but without the dollar sign (for
example, if your answer is $1.02, write 1.02).

The price of a European call option on a non-dividend-paying
stock with a strike price of $50 is $6. The stock price is $51, the
continuously compounded risk-free rate (all maturities) is 6% and
the time to maturity is one year. What is the price of a one-year
European put option on the stock with a strike price of $50?
a)$9.91
b)$7.00
c)$6.00
d)$2.09

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.

What is the price of a European call option on a
non-dividend-paying stock when
the stock price is $52, the strike price is $50, the risk-free
interest rate is 12% per annum, the
volatility is 30% per annum, and the time to maturity is three
months? (Hint: Remember Black-
Sholes-Merton Model. Please refer to the N(d) tables provided to
you to pick the N values you
need)

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.)

Consider a European call option on a non-dividend-paying stock
where the stock price is
$40, the strike price is $40, the risk-free rate is 4% per annum,
the volatility is 30% per
annum, and the time to maturity is 6 months.
(a) Calculate u, d, and p for a two-step tree.
(b) Value the option using a two-step tree.
(c) Verify that DerivaGem gives the same answer.
(d) Use DerivaGem to value the option with 5, 50, 100, and 500...

3) For a call option on a non dividend paying stock the stock
price is $30, the strike price is $20, the risk free rate is 6% per
annum, the volatility is 20% per annum and the time to
maturity is 3 months. Use the Binomial model to
find:
a) The price of the call option?
Can you show the binomial model please

3) For a call option on a non dividend paying stock the stock
price is $30, the strike price is $20, the risk free rate is 6% per
annum, the volatility is 20% per annum and the time to
maturity is 3 months. Use the Binomial model to
find:
a) The price of the call option?
Please show work

The current price of a non-dividend paying stock is $90. Use a
two-step binomial tree to value a European call option on the stock
with a strike price of $88 that expires in 6 months. Each step is 3
months, the risk free rate is 5% per annum with continuous
compounding. What is the option price when u = 1.2 and d = 0.8?
Assume that the option is written on 100 shares of stock.

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