Find the price of the call option

Reference no: EM1368303

Parameters
Strike price = $120;
Expiration time = 1 year;
Annual interest rate = 0.05;
Stock volatility = 0.35.
For the initial stock price, S0 = 100.45

Requirements

1. Find the price of the call option by the Black-Scholes formula rounded to the nearest cent.

2. Experiment with the number of steps for the binomial tree model until your numerical result stabilizes to within one cent of the result given by the Black-Scholes formula. How many steps?

Reference no: EM1368303

Questions Cloud

Diminishing marginal utility of dollars : A mathematically fair bet is one in which amount won will on average equal the amount bet,for example, when a gambler bets say, $100 for a 10% chance to win $1000

Describe market orientation case help : Describe Market orientation case help and Imagine you are tasked to diagnose market orientation of a specific business

Calculate the mean and standard deviation : Sandy James thinks housing values stabilized last months. To convince boss, intends compare current prices year prices. She collected 12 housing prices adds:

Determine same level of satisfaction : Debra listens only to either Frank Zappa or Weird Al Yankovic. She currently purchases 20 Zappa and 30 Yankovic downloads per week. She would forgo Yankovic downloads for one Zappa download at the rate of 2 to 1

Find the price of the call option : Experiment with the number of steps for binomial tree model until your numerical result stabilizes to within one cent of the result given through the Black-Scholes formula.

Aggregate demand : What happens to aggregate demand when transfer payments and the taxes to pay them both increase by the same amount?

Show how the successful mergers affects areas of hr : Show how the successful mergers affects the given areas of HR like HR planning, selection and compensation.

Future generations benefit from deficit spending : If deficit spending -crowds out some private investment, could future generations become worse off? If external financing eliminates crowding out, are future generations thereby protected?

Calculating annualized return : The treasurer of a U.S. firm noted that although short run deposits in Swiss bank accounts had earned the company only a 3% annualized return when measured in Swiss francs, in dollars the company had realized a 12% rate of return.

User Account

All Pages