A trader of an investment bank has sold a put option on the S&P 500 issued...
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A trader of an investment bank has sold a put option on the S&P 500 issued on 2021-04-01. Therefore, he must price and delta-hedge his short position in the put. The option has strike K = $3,000 and a maturity equal to 6 months (T= 0.5 year). He assumes that the S&P 500 follows the Black-Scholes and Merton model with constant drift μ and volatility σ: dSt = St [udt + odWt]. The constant short-term interest rate r is assumed to be equal to 0.5%. a. What data source could you have used to provide an estimate for the short-term interest rate? A trader of an investment bank has sold a put option on the S&P 500 issued on 2021-04-01. Therefore, he must price and delta-hedge his short position in the put. The option has strike K = $3,000 and a maturity equal to 6 months (T= 0.5 year). He assumes that the S&P 500 follows the Black-Scholes and Merton model with constant drift μ and volatility σ: dSt = St [udt + odWt]. The constant short-term interest rate r is assumed to be equal to 0.5%. a. What data source could you have used to provide an estimate for the short-term interest rate?
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For providing an estimate of the shortterm interest rate r you can refer to various sources 1 Centra... View the full answer
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
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