Question

The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%.

What is the value of the risk-free portfolio at the maturity?

Answer #1

Risk neutral probability = ( R - d) / ( u -d)

R = ( 1 + risk free rate ) = 1.06

u = upmove / current price = 16.50/15 = 1.10

d = downmove / current price = 14/15 = 0.93

Risk neutral probability =p=(R - d) / ( u -d)

= ( 1.06 - 0.93 ) / ( 1.10 - 0.93)

= 0.76

1 -p = 1 - 0.76 = 0.24

payoff from call option = Max [ Futures price - exercise price, 0 ]

payoff in upmove = 16.50 - 14.50 = 2.00

payoff in downmove = 0 as the futures price is less than exercise price

expected payoff = 0.76 * 2 + 0.24 * 0 = 1.52

value of the risk-free portfolio at the maturity =
**$1.52**

The current futures price of a stock is $15 per share. One month
later, when the futures option expires, the futures price could
have risen to $16.5 per share or declined to $14 per share. The
strike price is $14.5. The risk-free rate is 6%.
What is the value of long futures contract (per share) at the
option maturity? (1 mark)

The current futures price of a stock is $15 per share. One month
later, when the futures option expires, the futures price could
have risen to $16.5 per share or declined to $14 per share. The
strike price is $14.5. The risk-free rate is 6%.
Please solve the futures call option premium based on the fact
that at time zero, the cost of acquiring a portfolio is equal to
the value of the portfolio.

The current futures price of a stock is $15 per share. One month
later, when the futures option expires, the futures price could
have risen to $16.5 per share or declined to $14 per share. The
strike price is $14.5. The risk-free rate is 6%.
Please solve the futures call option premium based on the fact
that at time zero, the cost of acquiring a portfolio is equal to
the value of the portfolio

The current futures price of a stock is $15 per share. One month
later, when the futures option expires, the futures price could
have risen to $16.5 per share or declined to $14 per share. The
strike price is $14.5. The risk-free rate is 6%.
Please solve the futures call option premium based on the fact
that at time zero, the cost of acquiring a portfolio is equal to
the value of the portfolio

The current futures price of a stock is $15 per share. One month
later, when the futures option expires, the futures price could
have risen to $16.5 per share or declined to $14 per share. The
strike price is $14.5. The risk-free rate is 6%.
Please solve the futures call option premium based on the fact
that at time zero, the cost of acquiring a portfolio is equal to
the value of the portfolio

The current futures price of a stock is $15 per share. One month
later, when the futures option expires, the futures price could
have risen to $16.5 per share or declined to $14 per share. The
strike price is $14.5. The risk-free rate is 6%.
Please solve the futures call option premium based on the fact
that at time zero, the cost of acquiring a portfolio is equal to
the value of the portfolio.
(1 mark)

The current futures price of a stock is $15 per share. One month
later, when the futures option expires, the futures price could
have risen to $16.5 per share or declined to $14 per share. The
strike price is $14.5. The risk-free rate is 6%.
What is the cost of futures contract at time zero

The current price of a stock is $15. In 6 months, the price will
be either $18 or $13. The annual risk-free rate is 6%. Find the
price of a call option on the stock that has an strike price of $14
and that expires in 6 months. (Hint: Use daily compounding.) Round
your answer to the nearest cent. Assume a 365-day year Please show
work in excel

The current price of one share of GBP stock is 50.00. Aaron
Rodgers purchases (long) a call option on GBP stock with a strike
price of 53.00 and one-year to maturity. The price of the option is
4.95. The continuously compounded risk free rate is 4%.
What is Aaron’s profit at the end of one year if the stock
price at that time is 60.00 per share?
What is Aaron’s profit at the end of one year if the stock...

Find the price of an American call option on a futures if the
current spot price is 30, the exercise price is 25, the futures
price is 33.70, the risk-free interest rate is 6 percent, the spot
asset can go up by 10 percent or down by 8 percent per period and
the call expires in two periods, which is also when the futures
expires. A. 9.98 B. 8.70 C. 7.73 D. 8.22 E. none of the above
please show...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 32 minutes ago

asked 51 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago