What is the approximate call price after a stock price

Reference no: EM132466451

An American call with a strike of 90 on a stock worth 100 is traded in the market. The volatility is 35%, risk-free rate 2%, and the maturity of the option is half a year (no dividends are expected during the option's lifetime).

DerivaGem gives the following results for the Black-Scholes call price and Greeks:

Price:

15.7466816

Delta (per $):

0.72236133

Gamma (per $ per $):

0.01354569

Vega (per %):

0.23704963

Theta (per day):

-0.0258261

Rho (per %):

0.28244726

a. Using the delta-gamma approximation, what is the approximate call price after a stock price decrease to 97? 4

b. Starting from the initial situation as given above, what is the approximate call price after a decrease in implied volatility to 30%? 3

c. 3 days later, the stock price is still at 100, and volatility and risk-free rate are unchanged. Use the information from the table that is best suited for this task to give an estimate for the call price!

Reference no: EM132466451

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