5. In this problem, you will need the following table of N(d) to provide inputs for...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
5. In this problem, you will need the following table of N(d) to provide inputs for a Black-Scholes analysis. For values of d₁ and d2 that do not correspond exactly to values in the table, simply round off d₁ or d2 to the nearest entry on the table. Also, use the approximation that when X and S are close, In(S/X) equals the percentage difference between S and X, expressed as a decimal. For example, In(97/100) = ln(.97) = -.03. d 0.0 0 0.0 5 0.1 0 0.1 5 0.2 0 0.2 5 0.3 0 0.3 5 0.4 0 0.4 5 0.5 0 N(d) 0.50 0 0.52 0 0.54 0 0.56 0 0.57 9 0.59 9 0.61 8 0.63 7 0.65 5 0.67 4 0.69 1 d 0.5 5 0.6 0 0.6 5 0.7 0 0.7 5 0.8 0 0.8 5 0.9 0 0.9 5 N(d) 0.70 9 0.72 6 0.74 2 0.75 0.81 6 0.82 9 1.0 0.84 0 1.0 5 8 0.77 3 0.78 8 0.80 2 1 0.85 3 Suppose that your firm has issued a three-year European call option with an exercise price of $100 on a mutual fund. [Assume for simplicity that it has issued the call on one share of the fund.] Your assignment is to delta hedge the call option. The fund currently sells for $100 per share. It has a standard deviation of 20% per year and T-bills pay 5% per year. The portfolio pays no dividends. a. [10 points] What is the value of the call option? 5. In this problem, you will need the following table of N(d) to provide inputs for a Black-Scholes analysis. For values of d₁ and d2 that do not correspond exactly to values in the table, simply round off d₁ or d2 to the nearest entry on the table. Also, use the approximation that when X and S are close, In(S/X) equals the percentage difference between S and X, expressed as a decimal. For example, In(97/100) = ln(.97) = -.03. d 0.0 0 0.0 5 0.1 0 0.1 5 0.2 0 0.2 5 0.3 0 0.3 5 0.4 0 0.4 5 0.5 0 N(d) 0.50 0 0.52 0 0.54 0 0.56 0 0.57 9 0.59 9 0.61 8 0.63 7 0.65 5 0.67 4 0.69 1 d 0.5 5 0.6 0 0.6 5 0.7 0 0.7 5 0.8 0 0.8 5 0.9 0 0.9 5 N(d) 0.70 9 0.72 6 0.74 2 0.75 0.81 6 0.82 9 1.0 0.84 0 1.0 5 8 0.77 3 0.78 8 0.80 2 1 0.85 3 Suppose that your firm has issued a three-year European call option with an exercise price of $100 on a mutual fund. [Assume for simplicity that it has issued the call on one share of the fund.] Your assignment is to delta hedge the call option. The fund currently sells for $100 per share. It has a standard deviation of 20% per year and T-bills pay 5% per year. The portfolio pays no dividends. a. [10 points] What is the value of the call option?
Expert Answer:
Answer rating: 100% (QA)
QUESTION What are the two sources of cuckoldry that paternal grandfathers face in relation to their grandchildren Paternity uncertainty has proven to ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
Posted Date:
Students also viewed these accounting questions
-
What are the two sources of equity (ownership) capital for the firm?
-
What are the two sources of marketing problems?
-
What are the two sources of government health insurance?
-
Smart Price Company, a producer of black forest cakes, has budgeted sales and production (in units) for the last quarter in 2019 to be as follows: Sales Production October November 26,000 28,000...
-
Is it fair to categorize ARS 1 and ARS 3 as failures?
-
What would it mean if the poverty income threshold level of the United States were applied to Mexico?
-
What is the immigration surplus and how is it affected by human capital externalities?
-
What is a master budget and what are the guidelines that enhance its understandability and comparability?
-
Select at least two news articles that discuss demand, supply, and equilibrium price of two substitute products, like beef and chicken; butter and margarine. It can be two articles that discuss both...
-
Let today be November 3, 2008. (a) Use the LIBOR rate and the swap data on November 3, 2008 in Table 11.26 and fit the LIBOR curve. (b) From the LIBOR discount curve, fit the Ho-Lee model of the...
-
Lee Limiteds factory comprises of two production departments, Milling and Finishing, and two service departments Maintenance and Administration. The following estimated data are provided: Production...
-
(a) An investor invests $10,000 into a fund for 3 years. The annual nominal interest rate remains at 4% each year although it is convertible monthly in the first year, quarterly in the second year,...
-
Identify the characteristic equation of the following differential equation and the roots of the characteristic equation: 4y"-4y'+y=0
-
Give an example of how your political, networking and negotiating skills could contribute towards your working conditions.
-
How is the KM system of NASA different from other KM systems that you have studied within the chapter? How is it similar?
-
Provide two recommendations for Commerce Service Providers for the business (CSPs). One of the recommendations will be a mall-style CSP.
-
What is not a place where due diligence might happen?
-
on 8 For the following set of lengths 130, 170, 160, 160, 150, 190 Third quartile is: et red d out of Select one: O a. 160 a question O b. 145 O c. 175 O d. 180
-
What are the four types of out-of-court settlements? Briefly describe each.
-
Oral Roberts Dental Supplies has annual sales of $5,200,000. Ninety percent are on credit. The firm has $559,000 in accounts receivable. Compute the value of the average collection period.
-
How is valuation of any financial asset related to future cash flows?
-
What are the four main consumer rights?
-
Identify the four levels of a company's ethical environment.
-
What is meant by social responsibility, and why do companies exercise it?
Study smarter with the SolutionInn App