# Question: Let S 100 K 90 30

Let S = $100, K = $90, σ = 30%, r = 8%, δ = 5%, and T = 1.

a. What is the Black-Scholes call price?

b. Now price a put where S = $90, K = $100, σ = 30%, r = 5%, δ = 8%, and

T = 1.

c. What is the link between your answers to (a) and (b)? Why?

a. What is the Black-Scholes call price?

b. Now price a put where S = $90, K = $100, σ = 30%, r = 5%, δ = 8%, and

T = 1.

c. What is the link between your answers to (a) and (b)? Why?

## Answer to relevant Questions

Repeat the previous problem, but this time for perpetual options. What do you notice about the prices? What do you notice about the exercise barriers? Suppose S = $100, K = $95, σ = 30%, r = 0.08, δ = 0.03, and T = 0.75. a. Compute the Black-Scholes price of a call. b. Compute the Black-Scholes price of a call for which S = $100 × e −0.03×0.75, K = $95 × ...Using the parameters in Table 13.1, verify that equation (13.9) is zero. Repeat the previous problem, except that instead of hedging volatility risk, you wish to hedge interest rate risk, i.e., to rho-hedge. In addition to delta-, gamma-, and rhohedging, can you delta-gamma-rho-vega hedge? In ...Suppose S = $40, K = $40, σ = 0.30, r = 0.08, and δ = 0. a. What is the price of a standard European call with 2 years to expiration? b. Suppose you have a compound call giving you the right to pay $2 1 year from today to ...Post your question