Find the no-arbitrage cost of the european call option, Finance Basics

Assignment Help:

Question:

Suppose that a security is presently selling for a price of $65, the nominal interest rate is 8%, and the security volatility is 0.15.

a) Determine Delta of a European call option in 4 months with a strike price of $72.

b) Therefore or otherwise, find the no-arbitrage cost of the European call option.

c) What is the selling price of a European put-option with strike $72?

d) Now consider the market price of the European put-option with strike $72 was $4. Design a strategy for a sure-win situation.


Related Discussions:- Find the no-arbitrage cost of the european call option

Secondary markets - financial markets, Secondary Markets - Financial Market...

Secondary Markets - Financial Markets Economic Benefits or Role of Secondary Markets in the Economy are as: 1. It provides people a chance to buy shares therefore distribut

Draw the total expenses vs. time curve, For the set of activities shown in ...

For the set of activities shown in the table below, draw the total expenses vs. time curve using the following data: The labor rates are as follows: Labor # 1 (L1) rate = 30

Revenue Reserves - Retained Earnings, Revenue Reserves - Retained Earnings ...

Revenue Reserves - Retained Earnings These are undistributed earnings.  Those reserves are retained for the given reasons like: A. To create up for the fall in profits so a

Forms of business organizations, Forms of Business Organizations The te...

Forms of Business Organizations The term business is wide in meaning. It includes all human activities made for the sake of earning profits through the process of production of

Sole proprietorship, Sole Proprietorship Definition - A sole proprietor...

Sole Proprietorship Definition - A sole proprietorship or sole tradership is the oldest and simplest form of business. It is that type of business organization where one person

Illustrate in brief about the investment process, Illustrate in brief abou...

Illustrate in brief about the Investment  Process A  typical  investment  decision  undergoes  a  five  step  procedure which, in turn, forms the foundation of investment pr

Liquidity ratios - ratio analysis, Liquidity Ratios - Ratio Analysis I...

Liquidity Ratios - Ratio Analysis It also identified as working capital ratios.  They show capability of the firm to meet its short term maturing financial obligation/recent l

Comparison between modern and traditional methods, Comparison between Moder...

Comparison between Modern and Traditional Methods Both modern and traditional methods will indicate or show strong weaknesses which like a company cannot use either to choose

Creditors trade - measuring business performance, Creditors Trade - Measuri...

Creditors Trade - Measuring Business Performance Creditors Trade These are interested in the company's capability to meet their short-term obligations as and whenever the

Interpolation method, Interpolation method Consequently, r denote...

Interpolation method Consequently, r denotes required rate of return Consequently, r = 14 percent + (15 percent - 14 percent) x 253 .646 /253 .646 + 5.375

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd