Assume the Black-Scholes framework. Consider a 95-strike 9-month European call option on an S&V 150 futures contract
Question:
Assume the Black-Scholes framework.
Consider a 95-strike 9-month European call option on an S&V 150 futures contract which matures one year from now. You are given:
(i) The current price of the S&V 150 index is 100.
(ii) The volatility of the S&V 150 index price is 30%.
(iii) The volatility of the futures price is 30%.
(iv) S&V 150 pays dividends continuously at a rate proportional to its price. The dividend yield is 3%.
(v) The continuously compounded risk-free interest rate is 8%.
Calculate the price of the call option.
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Step by Step Answer:
Answer To calculate the price of the call option using the BlackScholes model we need to solve for the options fair value using the following formula ...View the full answer
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