Estimate the value of the option

Assignment Help Financial Management
Reference no: EM131240888

Consider a European put option on a non-dividend paying stock when the stock price is $100, the strike price is $110, the risk-free rate is 5% per annum, and the time to maturity is one year.

Suppose that the average variance rate during the life of an option has a 0.20 probability of being 0.06, a 0.5 probability of being 0.09, and a 0.3 probability of being 0.12. The volatility is uncorrelated with the stock price. Estimate the value of the option. Use DerivaGem.

Reference no: EM131240888

Questions Cloud

Manipulate this released energy in various ways : Captain Atom has a unique energy source: his own body.  As his atoms split (and somehow reform), he can manipulate this released energy in various ways.
Counterclockwise from the positive direction : What are (a) the x component and (b) the y component of a vector in the xy plane if its direction is 254° counterclockwise from the positive direction of the x axis and its magnitude is 8.4 m?
Speed of an approaching car : If you are on a two-lane highway, how far away from you must an approaching car be in order for you to safely pass the truck without colliding with the oncoming traffic? Assume the speed of an approaching car is also 25 m/s.
What does this tell us about their relationship : Suppose that you own a co?ee shop, and have estimated demand for co?ee as. What is the own-price elasticity for co?ee? Is co?ee elastic or inelastic? What is the cross-price elasticity between co?ee and scones? What does this tell us about their rela..
Estimate the value of the option : Suppose that the average variance rate during the life of an option has a 0.20 probability of being 0.06, a 0.5 probability of being 0.09, and a 0.3 probability of being 0.12. The volatility is uncorrelated with the stock price. Estimate the value..
Determine the acceleration of the jet plane : A jet plane requires 1468 m to reach takeoff speed of 90.56 m/s from rest. Determine the acceleration of the jet plane and the time required to reach this speed.
Characterize as unfair import competition : Unions in developed nations often oppose imports from low-wage countries and advocate trade barriers to protect jobs from what they often characterize as “unfair” import competition. Is such competition “unfair”? Do you think that this argument is in..
Determine total time for a ball to free fall : A ball is fall from deck of tall skyscraper 254 m above the street. Determine total time for a ball to free fall from the deck to the street below.
Determine the acceleration of the car : A car accelerates uniformly from rest to a speed of 8.94 m/s over a distance of 40.25 m. Determine the acceleration of the car.

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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