What is meant by the delta of a stock option

Reference no: EM131237325

1. A stock price is currently $40. It is known that at the end of 1 month it will be either $42 or $38. The risk-free interest rate is 8% per annum with continuous compounding. What is the value of a 1-month European call option with a strike price of $39?

2. Explain the no-arbitrage and risk-neutral valuation approaches to valuing a European option using a one-step binomial tree.

3. What is meant by the ‘‘delta'' of a stock option?

Reference no: EM131237325

Questions Cloud

Highly regarded international economic advisor : Suppose you are a highly regarded international economic advisor. You have been asked to assess thepossibilities of growth in an African country. It is a country abundant in labour and some natural resources.

What is the maximum ratio of the high strike price : A bank decides to create a five-year principal-protected note on a non-dividend-paying stock by offering investors a zero-coupon bond plus a bull spread created from calls. - What is the maximum ratio of the high strike price to the low strike pric..

What are ariadne demand functions : Ariadne's preferences can be described by the utility function U(x, y) = (3x1/2 + 6y1/2)2. Elliott'sutility function is U(x, y) = x + 3y1/3. (a) What are Ariadne's demand functions for goods x and y as a function of prices px and py and income I?

How much it costs to use appliances at an electrical cost : On a particular day, the following appliances are used for the times indicated: coffee maker, 40 min, and microwave oven, 12 min. Using the power requirements given in Table 4.4, find how much it costs to use the appliances at an electrical cost o..

What is meant by the delta of a stock option : Explain the no-arbitrage and risk-neutral valuation approaches to valuing a European option using a one-step binomial tree. - What is meant by the ‘‘delta'' of a stock option?

Discuss key facts and critical issues presented in the case : Give a detailed summary of the forensic investigation's findings along with the evidence against Mr. McVeigh. In a narrative format, discuss the key facts and critical issues presented in the case. Minimum word count is 500 words.

Does heat always flow from a body with more internal energy : Heat always flows from a high-temperature body in contact with one with a low temperature. Does heat always flow from a body with more internal energy to one with less internal energy? (Hint: Think about dropping a hot BB into a tub of water.

What is the value of a 6 month european put option : A stock price is currently $50. It is known that at the end of 6 months it will be either $45 or $55. - What is the value of a 6-month European put option with a strike price of $50?

Why do sidewalks have lined joints built into them : When eating a piece of hot apple pie, you may find that the crust is only warm but the apple filling burns your mouth. Why is this? Why do sidewalks have lined joints built into them?

User Account

All Pages