Imagine you are a financial consultant for a bank. The bank wants to sell three specific options
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Question:
Imagine you are a financial consultant for a bank. The bank wants to sell three specific options and has asked you to price them. The bank has provided the following information:
• the current value of the underlying asset is £100
• maturity time is 18 months
• no dividends
The three options are:
1. Call with strike £100
2. Put with strike £100
3. Butterly-like option with a payoff at maturity time of φ(S) = exp (-((S − 100)^2)/ 75), where S is the final value of the stock.
Price the option and provide a report to explain how the price has been computed
Sorry it's a typo. It should say butterfly
Related Book For
Exploring Management
ISBN: 978-1119231936
5th edition
Authors: John R. Schermerhorn, Daniel G. Bachrach
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