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European exercise put option on the index

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Reference no: EM132952919

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%.

Question1: Estimate the value of a European exercise call option on the index with an exercise price of 7100 and 100 days to run.

Question2: Estimate the value of a European exercise put option on the index with the same exercise price and expiry date.

Reference no: EM132952919

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