1. Find C 50 and P 50 , the theoretical values of 50 call and 50 put....
Question:
1. Find C50 and P50, the theoretical values of 50 call and 50 put. Now compare your results with the results that follow from Put-Call Parity. Comment on the results.
2. Find the call and put delta by using the formulas and compare the results using Put-Call Parity and calculus. Any comments?
The Black-Scholes-Merton formula for evaluating European options (no early exercise) on non-dividend paying stock is:
Where d1 =
And
X = the stock price
E = the strike price or exercise price
r = Risk free interest rate per annum.
= Volatility per annum
T-t = Number of years to expiration.
N(d1) = the area to the left of d1 under the Standard Normal Curve
If X = 50 and r = 0.05 and σ = 0.50 and there are 182 days to expiration then