Question

A future price is currently 50. At the end of six months it will either be...

A future price is currently 50. At the end of six months it will either be 56 or 45. What is the value of a six month European put option with strike price of 49? How would you hedge this option if you bought it?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
►A stock price is currently $50. It is known that at the end of six months...
►A stock price is currently $50. It is known that at the end of six months it will be either $46 or $54. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a six-month European put option with a strike price of $48? What is the value of a six-month American put option with a strike price of $48?
A stock price is currently $50. It is known that at the end of 3 months...
A stock price is currently $50. It is known that at the end of 3 months it will be either $50 or $48. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a 3-month European put option with a strike price of $49? How about a 6-month European call price? (Hint: 2 period binomial option pricing)
A stock price is currently $50. It is known that at the end of two months...
A stock price is currently $50. It is known that at the end of two months it will be either $53 or $48. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a two-month European call option with a strikeprice of $49? Use no-arbitrage arguments. At the end of two months the value of the option will be either $4 (if the stock price is $53) or $0 (if the stock price is...
A stock price is currently $180. It is known that it will be either $207 or...
A stock price is currently $180. It is known that it will be either $207 or $153 at the end of 3 months. The risk-free interest rate is 2% per annum with continuous compounding. What is the value of the 3- month European stock put option (with a strike price of $175)?
A stock price is currently $40. It is known that at the end of three months...
A stock price is currently $40. It is known that at the end of three months it will be either $45 or $35. The risk-free rate of interest with quarterly compounding is 8% per annum. Calculate the value of a three-month European put option on the stock with an exercise price of $40. Verify that no-arbitrage arguments and risk-neutral valuation arguments give the same answers
Suppose VS's stock price is currently $20. In the next six months it will either fall...
Suppose VS's stock price is currently $20. In the next six months it will either fall to $10 or rise to $30. What is the current value of a put option with an exercise price of $15? The six-month risk-free interest rate is 5% (periodic rate). Please indicate the formula
The price of a non-dividend paying stock is $45 and the price of a six-month European...
The price of a non-dividend paying stock is $45 and the price of a six-month European call option on the stock with a strike price of $46 is $1. The risk-free interest rate is 6% per annum. The price of a six-month European put option is $2. Both put and call have the same strike price. Is there an arbitrage opportunity? If yes, what are your actions now and in six months? What is the net profit in six months?
A stock price is currently $40. Over each of the next two three-month periods it is...
A stock price is currently $40. Over each of the next two three-month periods it is expected to go up by 10% or down by 10%. The risk-free interest rate is 12% per annum with continuous compounding. What is the value of a six-month European put option with a strike price of $42? What is the value of a six-month American put option with a strike price of $42? What is the value of a six-month American put option with...
A stock price is currently $40. It is known that at the end of three months...
A stock price is currently $40. It is known that at the end of three months it will be either $42 or $38. The risk free rate is 8% per annum with continuous compounding. What is the value of a three-month European call option with a strike price of $39? In three months: S0 = $40 X = $39, r = 8% per annum with continuous compounding. Use one step binomial model to compute the call option price. In particular,...
Suppose that firm D's shares are currently selling for $50. After six months it is estimated...
Suppose that firm D's shares are currently selling for $50. After six months it is estimated that the share price will either rise to $56.00 or fall to $44.75. If the share price rises to $56.00 in six months, six months from that date (1 year from today) the price is estimated to either rise to $62.72 or fall to $50.12. If the share price falls to $44.75 in six months, six months from that date (1 year from today)...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT