Option pricing model to price the call option

Assignment Help Financial Management

Reference no: EM13928880

The current stock price of a company is $68 and the stock is expected to have a dividend yield 3% per year. The instantaneous risk free rate of return is 3.5%. The instantaneous standard deviation of its stock is 35%. You wish to purchase options on this stock with an exercise price of $72 and an expiration date 9 months from now. Using the Black-Scholes Option Pricing Model to price the call option, its hedge ratio (delta) is __________ which is the number of stocks required to hedge against the price risk of holding one option.

Reference no: EM13928880

Questions Cloud

How much money is enough to live comfortable and sustainable : Terminating 100 employees that salaries range between $50K - $150K but continue to pay executives millions plus millions in bonus. That math and logic just doesn't seem to add up. So I ask again, how much money is enough to live a comfortable and ..

Record the acquisition in a financial statements model : Record the acquisition in a financial statements model like the preceding one.

Use black-scholes-merton model to price this put option : Consider a 6-month European put on GOOG with a strike price of $650. GOOG spot price is $725 and its volatility is 25%. The stock is not expected to pay any dividend. The risk-free rate is 4%. Use Black-Scholes-Merton (BSM) model to price this put op..

Determine how much additional money hoffman could borrow : Determine how much additional money Hoffman could borrow at this time to invest in inventory and accounts receivable without violating the terms of its borrowing agreement.

Option pricing model to price the call option : The current stock price of a company is $68 and the stock is expected to have a dividend yield 3% per year. The instantaneous risk free rate of return is 3.5%. The instantaneous standard deviation of its stock is 35%. Using the Black-Scholes Option P..

Basic understanding of several quantitative techniques : select a specific problem you see in the workplace (or, if you have limited work experience, that you would find it valuable to solve in your home life), and then identify what you wish to study. You must apply the theories and concepts from the c..

What is the amount of the net income : A firm has a return on equity of 15%. The debt-equity ratio is 50%. The total asset turnover is 1.25 and the profit margin is 8%. The total equity is $3,200. What is the amount of the net income?

What is the present coverage times interest earned ratio : What is the present coverage (times interest earned) ratio? How much additional 10 percent debt can the company issue now and maintain its times interest earned ratio at 3.5?

Under the concept of an efficient market : Under the concept of an efficient market, a random walk in stock prices means that:

User Account

All Pages