The below table shows the list of prices for puts expiring in 30 days (T = 1/12). Using the put option with a strike price of $236, estimate the level of the VIX index. K p 230 2.14 231 2.37 232 2.62 233 2.91 234 3.23 235 3.60 236 4.01 237 4.47 238 4.95 Other parameters you'll need: s0 = $234.35r = 0.74%T = 1/12 years (required precision 0.01 +/- 0.01)

The below table shows the list of prices for puts expiring in 30 days (T = 1/12). Using the put option with a strike price of $236, estimate the level of the VIX index. K p 230 2.14 231 2.37 232 2.62 233 2.91 234 3.23 235 3.60 236 4.01 237 4.47 238 4.95 Other parameters you'll need: s0 = $234.35r = 0.74%T = 1/12 years (required precision 0.01 +/- 0.01)

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 5P

See similar textbooks

Similar questions

The below table shows the list of prices for puts expiring in 30 days (T = 1/12). Using the put option with a strike price of $234, estimate the level of the VIX index. K 230 2.14 231 2.37 232 2.62 233 2.91 234 3.23 235 3.60 236 4.01 237 4.47 238 4.95 Other parameters you'll need: sO = $234.35 r = 0.74% T = 1/12 years (required precision 0.01 +/- 0.01)
You are using a two-step binomial tree to estimate the price of a put option on MCD. The strike price of the put option is $22. The price of MCD today is $32. The risk-free rate is 5%. What is the price of the put? Round your solution to the nearest three decimals if needed (Le. 2.312). Please do not type the $ symbol. u-3 d= 0.59 Click on the arrow next to the file below. Next, create a new sheet in the Respondus LockDown Browser spreadsheet. You can use this blank spreadsheet to calculate the answer. Blank Spreadsheet.xisx
Use the Black-Scholes model to value a call option with the following data: Price $34 Exercise price 30 Risk-free rate 0.04 time to expiry 0.5 0.31557 0.099584 0.762113 0.538972 0.777004 0.705047 Post your answer with 2 decimal places 5 0² d1= d2= Nd1= Nd2=
This section asks you to calculate prices for various options. In all cases, consider a rate r = 7.97% per year. Estimate the volatility of returns using the estimator: 1 n-1 σ²≈ T-t i=0 Si+1 log. Sti 2 The term of each option will be T = 182/360 (half a year). Determine a reasonable strike K, which is at similar levels to the price series you have downloaded. An option is a derivative instrument that gives its holder the right to buy or sell an underlying asset at a pre-agreed price K at a future date T. If this right can only be exercised in time T, we say that the option is of the European type. If it can be exercised at T or at any time prior to T, then we say that the option is American. Likewise, if the option grants the right to buy, we say that the option is Call type, if it grants the right to sell then the option is Puttype. These types of options are the simplest and are known as European vanilla options. In this case, if T is the expiration date of the contract, and St is…
Ringling Cycle’s stock price is now $20. You need to find the valueof a call option with a strike price of $22 that expires in 2 months.You want to use the binomial model with 2 periods (each period isa month). Your assistant has calculated that u = 1.1553, d = 0.8656,pu = 0.4838, and pd = 0.5095. Draw the binomial lattice for stockprices. What are the possible stock prices after 1 month? ($23.11or $17.31) After 2 months? ($26.69, $20, or $14.99) What are theoption’s possible payoffs at expiration? ($4.69, $0, or $0) Whatwill the option’s value be in 1 month if the stock goes up? ($2.27)What will the option’s value be in 1 month if the stock price goesdown? ($0) If each month is 1/12 of a year, what is the currentvalue of the option? ($1.10)
Assume that K=61, St =65, t = 0.25 (i.e. time to expiry is 3 months), and the risk-free rate is 0.04. The current price of the put option is p = 4. If the price of the call option is 7.17, describe the arbitrage that would be possible, and calculate the profit that would result.
Assume that K=61, St =65, t = 0.25 (i.e. time to expiry is 3 months), and the risk-free rate is 0.04. The current price of the put option is p = 4. What would the price of the call option ‘c’ need to be for put-call parity to hold?
1) Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $40, S = $37.90, r = 5.0%, σ = 0.35 2) Draw the binomial tree listing only the stock prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $70, S = $68.50, r = 6.0%, σ = 0.32 3) Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month put option, using 3-month intervals as the time period. K = $40.00, S = $37.90, r = 5.0%, σ = 0.35 4) Using a binomial tree explanation, explain the situation in which an American option would alter the pricing of an option.
For the European Put with the parameters S0 = 100, E = 110, r = 0, expiration in 3 months, use the 3-level tree model (At = 1/12) with u = 1.1, d = 0.9. Calculate the option price and deltas. %3D
Please solve in 30 minutes Assume the three-period binomial model (t = 0, 1, 2, 3) where S0 = 4, u = 2, d = 1/2 and r = 1/4. Consider a digital option that pays off $10 at time three if the stock price exceeds $7, but nothing otherwise. Find the value of this option at time zero?
Please calculate the price of a put option that matures in 2 months with a strike price of $58. Assume the risk free rate is 3%/month. 50 Month 1 A. 7.29 B.1.07 OC.11.3 OD.O 62.5 45 Month 2 78.125 56.25 40.5
Using put-call parity, if the price of an At-the-Money Call option maturing in 1 day is $3.14, what is the price of an of an At-the-Money Put option maturing in 1 day (give an approximation)? A. $0.95 B. $2.86 C. $3.14 D.$3.26