ABC stock has price $71.40 at noon, and currently pays no dividend. Consider a six-month European-style call on ABC stock. The call has price = 4.55, delta = 0.45, theta = -6.00/year, gamma = .026. Suppose that the stock price is still $71.40 in 1.0 months. What should be the (new) price of the call option?

ABC stock has price $71.40 at noon, and currently pays no dividend. Consider a six-month European-style call on ABC stock. The call has price = 4.55, delta = 0.45, theta = -6.00/year, gamma = .026. Suppose that the stock price is still $71.40 in 1.0 months. What should be the (new) price of the call option?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4MC

See similar textbooks

Similar questions

Question 5: A call option on a stock that expires in a year has a strike price of $99. The current stock price is $100 and the one-year risk free interest rate is 10%. The price of this call is $6. a) Is arbitrage possible? What is the arbitrage position? b) do you het this minimum? Find the minimum arbitrage profit for this strategy. When
Back Open in Safa Consider a stock with a volatility of its logarithm of =0.2. The current price of the stock is $88 and it pays no dividends. Find the option prices on this stock that has an expiration date 4 months from now and a strike price of $90. The current interest rate is 15% compounded monthly. (Write the answers with two decimal places. x.yz) European call option premium European put option premium = $4 Home Courses Tasks Calendar Messages Back Open in Safa European put option premium =| American call option premium = 24 American put option premium = %24 %24
Consider a stock with a current price of P $27 Suppose that over the next 6 months the stock price will either go up by a factor of 1.41 or down by a factor of 071. Consider a call option on the stock with a strike price of $25 that expires in 6 months. The nsk-free rate is 6%. (1) Using the binomial model, what are the ending values of the stock price? What are the payoffs of the call option? (2) Suppose you write one call option and buy N shares of stock How many shares must you buy to create a portfolo with a riskless payoff Ge, a hedge portfolio)? What is the payoff of the portfolio? 13)What.is the.present.value of the hedge port- Tolot What &the value of phe calt.option? (4) What s a teplieatirg portfolio What is 2otrage?
3. Consider a European call option on a non-dividend paying stock with exercise price 100 USD and expiration in one month. Interest rate is 1 percent and volatility of the stock is 0.4. Stock price 90 USD. Option price?? Use excel.
■ Yegi’s Fine Phones has a current stock price of $30. You need to findthe value of a call option with a strike price of $32 that expires in3 months. Use the binomial model with one period until expiration(i.e., t = 0.25 and n= 1). The factor for an increase in stock price isu = 1.15; the factor for a downward movement is d = 0.85. Whatare the possible stock prices at expiration? ($34.50 or $25.50)What are the option’s possible payoffs at expiration? ($2.50 or$0) What are pu and pd? (0.5422 and 0.4429) What is the currentvalue of the option (assume each month is 1/12 of a year)? ($1.36)
3. Consider a European put option on a non-dividend paying stock with exercise price 100 USD and expiration in one month. Interest rate is 1 percent and volatility of the stock is 0.4. Stock price 90 USD. Option price?? Use excel.
5. A "cash-or-nothing binary stock option" is a European-style option and pays some fixed amount of cash to the holder at maturity T > 0 if the stock price at time T > 0 is above a certain threshold K (also referred to as the strike price). Suppose a stock price is currently at $50. Assume that over each of the next two 3-month periods the stock price will either go up by 6% or go down by 5%. The risk-free rate is 5% p.a. with continuous compounding. Use a two-step binomial tree model to compute the arbitrage-free price of a cash-or-nothing option written on that stock which pays $1 if the stock price in three months is above K = $50.
Suppose ABC's stock price is currently $25. In the next six months it will either fall to $15 or rise to $40. What is the current value of a six-month call option with an exercise price of $20? The six-month risk-free interest rate is 5% (periodic rate). [Use the riskneutral valuation method]A. $20.00 B. $8.57 C. $9.52 D. $13.10
An increase in the rate of interest A fall in the level of demand A decrease in the rate of interest A stock sells P110. A call option on the stock with an exercise price of P105 and expires in 43 days. If the interest rate is 0.11 and the standard deviation of the stock's return is 0.25, what is the price of the CALL OPTION according to the Black-Scholes Model? P6.92 P8.05 T P7.68 P6.88 O Focu: States)
1. Consider a 4 month European put on a stock with no dividend the follow- ing parameters: S(0) = 305, K (a) Compute the option's vega (b) If o increases by 0.01, what is the approximate increase in the value of the option? 300, r = 0.08, o = 0.25
Question 2 (a) Use the Black-Scholes formula to find the current price of a European call option on a stock paying no income with strike 60 and maturity 18 months from now. Assume the 20%, and the constant current stock price is 50, the lognormal volatility of the stock is a = continuously compounded interest rate is r 10% (b) Repeat part (a) for a European put with strike 60 and maturity 18 months from now
Question 2. (a) Use the Black-Scholes formula to find the current price of a European call option on a stock paying no income with strike 60 and maturity 18 months from now. Assume the current stock price is 50, the lognormal volatility of the stock is σ = 20%, and the constant continuously compounded interest rate is r = 10%.