Calculate a volatility smile for 3 month options

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Reference no: EM131237975

A futures price is currently $40. The risk-free interest rate is 5%. Some news is expected tomorrow that will cause the volatility over the next 3 months to be either 10% or 30%.

There is a 60% chance of the first outcome and a 40% chance of the second outcome. Use DerivaGem to calculate a volatility smile for 3-month options.

Reference no: EM131237975

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