Question

Use the Black-Scholes formula to calculate the value of a European call option on silver futures....

Use the Black-Scholes formula to calculate the value of a European call option on silver futures. The option matures in six months. The current nine-month futures price is \$10 per oz, the strike price of the option is \$8, the risk free interest rate is 12% per annum and the volatility of the futures price is 18% per annum. Use the NORM.S.DIST(x) function in Excel. Round to two decimals.

What is the delta of the call option on the futures contract from Problem #1?

the above is formula of Black Scholes model for call valuation , value of Spot price (S) is not given ,

for Future price , F = S* er t

=> S = 10 / e 0.12*0.75 = \$ 9.14.

 Input Data Stock Price now (S) 9.14 Exercise Price of Option (K) 8 Number of periods to Exercise in years (t) 0.50 Compounded Risk-Free Interest Rate (rf) 12.00% Standard Deviation (annualized s) 18.00% Output Data Present Value of Exercise Price (PV(K)) 7.5341 s*t^.5 0.1273 d1 1.5817 d2 1.4544 Delta N(d1) Normal Cumulative Density Function 0.9431 N(d2)*PV(K) 6.9848 Value of Call 1.6355

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