Question: Repeat the previous problem for up and out puts assuming a barrier
Repeat the previous problem for up-and-out puts assuming a barrier of $44.
Answer to relevant QuestionsLet S = $40, K = $45, σ = 0.30, r = 0.08, and δ = 0. Compute the value of knockout calls with a barrier of $60 and times to expiration of 1 month, 2 months, and so on, up to 1 year. As you increase time to expiration, what ...Use the information in Table 15.5. a. What is the price of a bond that pays one barrel of oil 2 years from now? b. What annual cash payment would the bond have to make in order to sell for $20.90? Suppose the effective semiannual interest rate is 3%. a. What is the price of a bond that pays one unit of the S&P index in 3 years? b. What semiannual dollar coupon is required if the bond is to sell at par? c. What ...Assume that the volatility of the S&P index is 30% and consider a bond with the payoff S2 + λ × [max(0, S2 − S0) − max(0, S2 − K)]. a. If λ = 1 and K = $1500, what is the price of the bond? b. Suppose K = $1500. For ...Using the assumptions of Example 16.4, and the stock price derived in Example 16.5 suppose you were to perform a "naive" valuation of the convertible as a risk free bond plus 50 call options on the stock. How does the price ...
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