# Question: Suppose the S P 500 futures price is 1000

Suppose the S&P 500 futures price is 1000, σ = 30%, r = 5%, δ = 5%, T = 1, and n = 3.

a. What are the prices of European calls and puts for K = $1000? Why do you find the prices to be equal?

b. What are the prices of American calls and puts for K = $1000?

c. What are the time-0 replicating portfolios for the European call and put?

a. What are the prices of European calls and puts for K = $1000? Why do you find the prices to be equal?

b. What are the prices of American calls and puts for K = $1000?

c. What are the time-0 replicating portfolios for the European call and put?

**View Solution:**## Answer to relevant Questions

For a stock index, S = $100, σ = 30%, r = 5%, δ = 3%, and T = 3. Let n = 3. a. What is the price of a European call option with a strike of $95? b. What is the price of a European put option with a strike of $95? c. Now ...Obtain at least 5 years of daily data for at least three stocks and, if you can, one currency. Estimate annual volatility for each year for each asset in your data. What do you observe about the pattern of historical ...Repeat the previous problem, except that for each strike price, compute the expected return on the option for times to expiration of 3 months, 6 months, 1 year, and 2 years. What effect does time to maturity have on the ...Repeat Problem 11.1, only assume that r = 0.08. What is the greatest strike price at which early exercise will occur? What condition related to put-call parity is satisfied at this strike price? In Problem 11.1 Consider a ..."Time decay is greatest for an option close to expiration." Use the spreadsheet functions to evaluate this statement. Consider both the dollar change in the option value and the percentage change in the option value, and ...Post your question