Let S = $40, K = $45, = 0.30, r = 0.08, T = 1, and

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Let S = $40, K = $45, σ = 0.30, r = 0.08, T = 1, and δ = 0.

a. What is the price of a standard call?

b. What is the price of a knock-in call with a barrier of $44? Why?

c. What is the price of a knock-out call with a barrier of $44? Why?

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Derivatives Markets

ISBN: 9789332536746

3rd Edition

Authors: Robert McDonald

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Question Posted: Aug 12, 2015 02:46 AM

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Let S = $40, K = $45, = 0.30, r = 0.08, T = 1, and

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a A standard call is worth 41293 b A knock in call will also be worth 41293 y...View the full answer

Derivatives Markets

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