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?

Homework Answers

Answer #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
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the delta of a short position in 1,000 European call options on Silver futures?...
What is the delta of a short position in 1,000 European call options on Silver futures? The options mature in 8 months and the futures contract underlying the option matures in 9 months. The current 9-month futures price is €8 per ounce, the exercise price of the options is €8, the risk-free rate is 12% per annum, and the volatility of silver is 18% per annum.
A 3-month European call on a futures has a strike price of $100. The futures price...
A 3-month European call on a futures has a strike price of $100. The futures price is $100 and the volatility is 20%. The risk-free rate is 2% per annum with continuous compounding. What is the value of the call option? (Use Black-Scholes-Merton valuation for futures options)
Use Black-Scholes model to price a European call option Use the Black-Scholes formula to find the...
Use Black-Scholes model to price a European call option Use the Black-Scholes formula to find the value of a call option based on the following inputs. [Hint: to find N(d1) and N(d2), use Excel normsdist function.] (Round your final answer to 2 decimal places. Do not round intermediate calculations.) Stock price $ 57 Exercise price $ 61 Interest rate 0.08 Dividend yield 0.04 Time to expiration 0.50 Standard deviation of stock’s returns 0.28 Call value            $
Use the Black-Scholes formula to value the following options: a. A Call option written on a...
Use the Black-Scholes formula to value the following options: a. A Call option written on a stock selling for $100 per share with a $110 exercise price. The stock's standard deviation is 15% per quarter. The option matures in three months. The risk free interest is 3% per quarter. b. A put option written on the same stock at the same time, with the same exercise price and expiration date. Now for each of these options find the combination of...
7. Use the Black -Scholes formula to find the value of a call option on the...
7. Use the Black -Scholes formula to find the value of a call option on the following stock: Time to expiration = 6 months Standard deviation = 50% per year Exercise price = $50 Stock price = $50 Interest rate = 3% Dividend = 0 8. Find the Black -Scholes value of a put option on the stock in the previous problem with the same exercise price and expiration as the call option. NEED HELP WITH NUMBER 8
Assume risk-free rate is 5% per annum continuously compounded. Use Black-Scholes formula to find the price...
Assume risk-free rate is 5% per annum continuously compounded. Use Black-Scholes formula to find the price the following options: European call with strike price of $72 and one year to maturity on a non-dividend-paying stock trading at $65 with volatility of 40%. European put with strike price of $65 and one year to maturity on a non-dividend-paying stock trading at $72 with volatility of 40%
1:Consider a European call option on a stock with current price $100 and volatility 25%. The...
1:Consider a European call option on a stock with current price $100 and volatility 25%. The stock pays a $1 dividend in 1 month. Assume that the strike price is $100 and the time to expiration is 3 months. The risk free rate is 5%. Calculate the price of the the call option. 2: Consider a European call option with strike price 100, time to expiration of 3 months. Assume the risk free rate is 5% compounded continuously. If the...
You are evaluating a European call option on a no-dividend paying stock that is currently priced...
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.
1. Calculate the value of the D1 parameter for a call option in the Black-Scholes model,...
1. Calculate the value of the D1 parameter for a call option in the Black-Scholes model, given the following information: Current stock price: $65.70 Option strike price: $74 Time to expiration: 7 months Continuously compounded annual risk-free rate: 3.79% Standard deviation of stock return: 22% 2. Calculate the value of the D2 parameter for a call option in the Black-Scholes model, given the following information: Current stock price: $126.77 Option strike price: $132 Time to expiration: 6 months Continuously compounded...
Black-Scholes Model Use the Black-Scholes Model to find the price for a call option with the...
Black-Scholes Model Use the Black-Scholes Model to find the price for a call option with the following inputs: (1) Current stock price is $21. (2) Strike price is $24. (3) Time to expiration is 5 months. (4) Annualized risk-free rate is 4%. (5) Variance of stock return is 0.17. Round your answer to the nearest cent. In your calculations round normal distribution values to 4 decimal places. Please show step by step calculations in excel. Thank you
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT