Relationship between the option price and the stock price

Assignment Help Financial Management

Reference no: EM132020510

Consider an up-and-out barrier call option on a non-dividend-paying stock when the stock price is 50, the strike price is 50, the volatility is 30%, the risk-free rate is 5%, the time to maturity is 1 year, and the barrier at $80. Use the DerivaGem software to value the option and graph the relationship between

(a) the option price and the stock price

(b) the delta and the stock price

(d) the option price and the volatility

(e) Provide an intuitive explanation for the results you get. Show that the delta, gamma, theta, and vega for up-and-out barrier call option can be either positive or negative.

Reference no: EM132020510

Questions Cloud

Firm raises capital with issuing debt and prefer stocks : A firm raises capital with issuing debt and prefer stocks. Compute cost of debt.

Struggling to provide for children education-other expenses : Now that Mr Au has passed away, Mrs Au is struggling to provide for her children’s education and other expenses.

Pros and cons of the duration model in interest rate risk : What are the pros and cons of the Duration Model in Interest rate risk.

Stock compensation plans are offered by apple and alphabet : What employee stock compensation plans are offered by Apple and Alphabet (plan name and type of awards)?

Relationship between the option price and the stock price : Use the DerivaGem software to value the option and graph the relationship between the option price and the stock price.

What is the capitalized equivalent cost of this investment : what is the capitalized equivalent cost of this investment at the rate of 13.3%? Enter your answer as a positive number."

Why does australia have a small bond market : Why does Australia have a small bond market? Do you think that this will this change in the future?

Correct strategy to hedge its interest rate exposure : Which of the following is a correct strategy to hedge its interest rate exposure?

Automate its payroll processing by using scanner : "A clothing retailer plans to automate its payroll processing by using a scanner that identifies which clerks sold which item.

User Account

All Pages