The graph shows the price profile (option price vs. strike, in the Black-Scholes model) of 6- month
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Question:
The graph shows the price profile (option price vs. strike, in the Black-Scholes model) of 6- month options on XYZ, for two different implied volatilities (IVs): 22% and 40%. Recall that 22% was the implied volatility where the $50-strike put was priced, and 40% was the implied volatility where the $30-strike put was priced.
At what value of the strike is the price difference (for the two different implied volatilities)
the biggest? Any thoughts on this?
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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