The price of a non-dividend paying stock is $100 per share, the exercise (i.e., strike) price is $103, the annual risk-free rate is 6 percent per year, the volatility (i.e., annualized standard deviation) is 30 percent per year, and the time to maturity is 9 months.

a) Find the value of the European put option on the stock.
b) Find the delta of the European put option on the stock.
c) Find the gamma of the European put option on the stock.
d) Find the vega of the European put option on the stock.
e) Assume that you take a long position in 100 European put options on the stock. How can the position be made delta neutral?

Answer rating: 100% (QA)

To calculate the value of the European put option on the stock and its various Greeks delta gamma and vega we can use the BlackScholes option pricing ... View the full answer