# Question

Let S = $40, σ = 0.30, r = 0.08, T = 1, and δ = 0. Also let Q = $60, σQ

= 0.50, δQ = 0.04, and ρ = 0.5. What is the price of a standard 40-strike call with S as the underlying asset? What is the price of an exchange option with S as the underlying asset and 0.667 × Q as the strike price?

= 0.50, δQ = 0.04, and ρ = 0.5. What is the price of a standard 40-strike call with S as the underlying asset? What is the price of an exchange option with S as the underlying asset and 0.667 × Q as the strike price?

## Answer to relevant Questions

Let S = $40, σ = 0.30, r = 0.08, T = 1, and δ = 0. Also let Q = $60, σQ = 0.50, δQ = 0, and ρ = 0.5. In this problem we will compute prices of exchange calls with S as the price of the underlying asset and Q as the ...Suppose that S = $100, σ = 30%, r = 8%, and δ = 0. Today you buy a contract which, 6 months from today, will give you one 3-month to expiration at-the-money call option. (This is called a forward start option.) Assume that ...Repeat the previous problem for up-and-out puts assuming a barrier of $44. Using the information in Table 15.5, suppose we have a bond that after 2 years pays one barrel of oil plus λ × max(0, S2 − 20.90), where S2 is the year-2 spot price of oil. If the bond is to sell for $20.90 and oil ...Value the M&I stock purchase contract assuming that the 3-year interest rate is 3% and the M&I volatility is 15%. How does your answer change if volatility is 35%?Post your question

0