Calculate the delta of the option

Assignment Help Finance Basics
Reference no: EM133070461

Stock A is trading for $150. Consider an option that allows you to buy the stock for $150. What type of option is it, and in which state is it at?

a) If the stock can only go either up to $190 or down to $130 in the six months before expiry, what is the payoff of the option?

b) At a 4% semi-annual interest rate, calculate the delta of the option.

c) How much do you have to borrow / lend to replicate the payoff of the option?

d) What is the value of the option using replication?

e) What is the value of the option using risk neutral probabilities?

Reference no: EM133070461

Questions Cloud

Draw payoff diagram for a long put position : -Draw payoff diagram for a long put position on a stock of XYZ that you purchased for $10, has a strike price of $100 and matures in 6 months from now.
What is estimate of the price : Free Cash Flow to the Firm for BestBuy is projected to be $2 billion next year and is expected to grow by 3% annually thereafter. If the WACC is 5%, Net Debt =$
Determine the coupon rate of a fixed-income security : List two examples of different benchmarks that are used to determine the coupon rate of a fixed-income security?
Determine the employee total income tax deduction : Jocelyne has worked for Calgary Creations in Edmonton, Alberta since 2012. She earns $36.32 per hour, Determine the employee total income tax deduction
Calculate the delta of the option : Stock A is trading for $150. Consider an option that allows you to buy the stock for $150. What type of option is it, and in which state is it at?
Discuss the legal doctrine : Discuss the legal doctrine under which Jim might also recover from Flowers, Inc. Can Jim recover damages from Ruth; from Flowers' Inc? Why or why not?
Compute the annual standard deviation of portfolio : Please use the data provided in the excel file and answer the following questions:
Equities vs fixed income among client accounts : Why does discount brokerage have a greater mix of equities vs. fixed income among client accounts?
What is the expected share price of Pinder Ltd : Pinder Ltd is currently trading at $15 per share and is planning on a dividend of $2 per share. What is the expected share price of Pinder Ltd

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

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