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Calculate the value of a three-month european call

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Reference no: EM133110037

The ASX200 Share Price Index (SPI) stands at 7,300 and has a volatility (standard deviation) of 20% per annum. The risk-free rate of interest is 3% p.a. and the index provides a dividend yield of 4% p.a. (all rates are continuously compounded). If an option on the SPI is for $25 x SPI, calculate the value of a three-month European call with an exercise price of 7,400. Explicitly show the results of your calculations for the intermediate values d1 and d2.

Reference no: EM133110037

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