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Find out value of the call and put option

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Reference no: EM133004136

The current stock price of asset ABC is $52. You consider buying call or put options on that stock with a strike price of 55 and a time to expiry of 6 months. The term structure of interest rates is flat up to 1 year at 1%. The historic volatility is 18%, measured by the standard deviation, but your belief is that the volatility over the next 6 months will be higher and your expectations are 22%. Assuming normality what would be the value of the call and put option?

Reference no: EM133004136

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