Reference no: EM133077805

In a market, 1-year call options are traded on the company's Glassigt AB and Helt Ordin Glas AB, both with an exercise price of SEK 179. Glassigt AB is developing a new recipe for glass with secret experimental ingredients. The secret ingredients contain substances that are not normally used in food and Glassigt AB must apply for a permit from the National Food Administration to be allowed to sell the glasses. The company's share price is affected by the outcome of the work on the new recipe as it may affect glass sales in the future. If the glasses are not approved, the company will not be able to sell the glasses and therefore not make any money on the product. If the ice cream is approved and is as divine god as one hopes it will be a success and one will be able to sell large quantities at a high price. If the ice cream is approved but is not tastier than any other ice cream, the company will admittedly be able to sell the ice cream but will have to sell it at a much lower price. Ordinary glass AB's share prices are of course also affected by the outcome as it is a competing company operating in the same glass market.

The table contains probabilities for the different outcomes and the share prices the different outcomes result in. Calculate the expected payoff for a long position in the option whose payoff has the highest volatility (standard deviation)