Mark bought a call option ten days ago on a stock

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1. Mark bought a call option ten days ago on a stock, the call expires at the end of the year and has a strike price of 50. John bought a call option on the same stock yesterday, the call also expires at the end of the year and has a strike price of 50. Today, who's option has a higher value, Mark's or John's?

2. knowing A ree pros ems, i i e op tons ave e same expzra ton me an same strike K. For the price of a bather option, the argument is the value of the bather. For example, Cw,..and.in(50) is the price of an up-and-in call option with a barrier of 50.

2.   Which of the following is true? Where C is the value of a regular call option.

A.   Cup-and-in(50) + Cup-and-out(50) = C               B.       Cup.and.i„(50) - Cup-and-out(50) = C

C. -C„p.„„d_in (50) C„p-and-out (50) = C              D. -Cup.and-in(50) - Cup.and-out (50) = C

3.   A portfolio consists of an up-and-in call with a barrier of 50 and an up-and-in call with a barrier of 60. Describe the payoff of the protfolio at time T by filling in the table.

Up to time T

Time T Payoff

S did not hit 50

 

S hit 50, but did not hit 60

 

S hit 60

 

4.  An option has the following payoff at time T.

Up to time T

Time T Payoff

S did not hit 50

0

S hit 50, but did not hit 60

2(ST - Kr

S hit 60

(Sr - Kr

What is the premium of this option in terms of Cup-a„d-out(50), Cup-and-out(60), or C?

Reference no: EM131133248

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