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Estimate the value of european exercise put option on index

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Reference no: EM132952555

As an expert in pricing financial derivatives, your friend, John, approached you seeking a professional advice on the fair price of the European style call and put option on the FTSE 100 index.

The following data relate to the FTSE 100 index.

Current price 7125

Dividend Yield 2.95%

Volatility 13.25%

The risk-free rate of interest is 1%.

Problem 1: Estimate the value of a European exercise put option on the index with the same exercise price and expiry date.

Reference no: EM132952555

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