Deduce the volatility implied by the black-scholes pde

Assignment Help Financial Management

Reference no: EM131081504

Recall the definition of implied volatility introduced in the problems on Section 10.7. Assume the underlying asset price is 50, A call of unspecified strike has a price of $5. The call has a Theta of 2. a Delta of 0.5 and a Gamma of 0.05. The risk-free rate is 5% Deduce the volatility implied by the Black-Scholes PDE.

Reference no: EM131081504

Questions Cloud

Collections float and disbursement float : On a typical day,U.C. Stars Vision Center writes $30,000 in checks, which take THREE days to clear. They receive an average of $40,000 in checks from patients on a daily basis, which take five days to clear. (Show your work) What is U.C.’s disburseme..

What is risk reduction of investing in portfolio containing : You invest one-third of your wealth in each of three stocks. The expected return and standard deviation of each individual stock is 10 percent and 20 percent, respectively. Each stock has a pairwise correlation of 0.50 with the returns of the two oth..

Compute the delta and gamma of the at-money-put : The underlying asset Is $50 with volatility 15%. An at-the-money call option has a price of $5. The call has a Theta of 2.65 and a Gamma of 0.05. The risk-free rate is 5%. Compute the Delta and Gamma of the at-money-put and use them to estimate the c..

What must be the beta for the other stock of your portfolio : You own a portfolio invested in a risk free asset and two stocks. If one of the stocks has a beta of 0.5, and the total portfolio is half as risky as the market, what must be the beta for the other stock of your portfolio?

Deduce the volatility implied by the black-scholes pde : Recall the definition of implied volatility introduced in the problems on Section 10.7. Assume the underlying asset price is 50, A call of unspecified strike has a price of $5. The call has a Theta of 2. a Delta of 0.5 and a Gamma of 0.05. The risk-f..

Money in stock with an expected return : You have $63,000. You put 19% of your money in a stock with an expected return of 13%, $38,000 in a stock with an expected return of 17%, and the rest in a stock with an expected return of 23%. What is the expected return of your portfolio?

What is the company unlevered cost of equity capital : Twice Shy Industries has a debt−equity ratio of 1.4. Its WACC is 9.4 percent, and its cost of debt is 6.7 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capi..

Smallest expected loss in the coming year with probability : DW Co. stock has an annual return mean and standard deviation of 8 percent and 31 percent, respectively. What is the smallest expected loss in the coming year with a probability of 16 percent?

Forecast level would you be neutral to make-buy decision : You can buy product X from company ABC for $33/piece. Alternatively, you can make product X in-house. You would have to purchase a small building at $200,000, purchase two machines at $40,000 and $28,000, and hire two operators for the machines. At w..

User Account

All Pages