User Account

All Pages

Black-Scholes-Merton model

Assignment Help Financial Management
Reference no: EM133305472

Consider options on Oil Futures with a strike price of $130. The 1-year Oil Futures price is $140 and its volatility is 25%. The risk-free rate is 10%.

1. Use Black-Scholes-Merton (BSM) model to price a 1 year European put option on Oil Futures?

2. Without using Black-Scholes-Merton (BSM) model, what is the price of a 1 year European Strip?

3. What is the delta of the Strip?

Reference no: EM133305472

Questions Cloud

Inflation and interest rates : What would you expect the nominal rate of interest to be if the real rate is 3.7 percent and the expected inflation rate is 7.3 percent?
What is the bond yield to maturity : The market price is $1,075 for a 17-year bond ($1,000 par value) that pays 11 percent annual interest, What is the bond's yield to maturity?
Calculate the value of bond : Calculate the value of a bond that matures in 19 years and has a $1,000 par value.
Indifference EBIT between common shares and preferred shares : Compute indifference EBIT between common shares and preferred shares. If expected EBIT is less than indifference EBIT which financing option should be pursued?
Black-Scholes-Merton model : Use Black-Scholes-Merton (BSM) model to price a 1 year European put option on Oil Futures? What is the delta of the Strip?
What is its cost of common equity : What is its cost of common equity? Which projects should Empire accept? What is the WACC?
What were the results of the experiment : How did the study organizers fix the game of Monopoly to ensure certain players win? What were the results of the experiment?
What is the company cost of common equity : What is the company's cost of common equity if all of its equity comes from retained earnings?
Problematic financial institutions : What are some of the problems that individuals might face if they use one of the "problematic" financial institutions?

Reviews

Write a Review

Financial Management Questions & Answers

  Create an arbitrage portfolio that pays exactly

Create an arbitrage portfolio that pays exactly $15 in 2 years and costs nothing today.

  Firm value-wacc are independent of firm capital structure

Each firm has an optimal capital structure where WACC is maximized. Firm value and WACC are independent of the firm's capital structure.

  Why can pro-forma financial information be misleading

Which industries would you expect to have more financial leverage and why. Why can pro-forma financial information be misleading?

  Desire breakdown of return on investment into return sales

Accountants often express ROI as the product of two components - capital turnover and return on sales. You are considering investing in one of three companies, all in the same industry, and are given the following information: Why would you desire th..

  Finance make at the beginning of each year

Finance make at the beginning of each year under this scenario from an account paying 6% compounded annually?

  The firm reduced net working capital investment

Suppose you also know that the firm’s net capital spending for 2015 was $1,310,000, and that the firm reduced its net working capital investment by $57,000.

  Compares the firms financial leverage and profitability

Use them in a ratio analysis that compares the firms' financial leverage and profitability.

  Shareholders thought the value of investments was growing

With Enron, shareholders thought the value of their investments was growing, but the reality is that fraudulent actions were taking place.

  How would the final decision be made

Create a flowchart illustrating the steps you would follow and the processes you would use to arrive at an effective team decision.

  What is the loan effective annual rate

A loan is offered with monthly payments and a 15.00 percent APR. What’s the loan’s effective annual rate (EAR)?

  Benefits derived from short-term financial planning

Which of the following are benefits derived from short-term financial planning?

  Estimate of the total rate of return on your investment

What is the estimate of the total rate of return on your investment over the 10 years holding period? Make sure to SHOW FORMULA USED.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd