FREE Trial

Calculate the value of a five-month European futures put option when the futures price is $19, the

Question:

Calculate the value of a five-month European futures put option when the futures price is $19, the strike price is $20, the risk-free interest rate is 12% per annum, and the volatility of the futures price is 20% per annum.

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 50% (10 reviews)

In this case and The ...View the full answer


answer-question-section
Answered By
tutor-profile-image
Lamya S
Highly creative, resourceful and dedicated High School Teacher with a good fluency in English (IELTS- 7.5 band scorer) and an excellent record of successful classroom presentations. I have more than 2 years experience in tutoring students especially by using my note making strategies. Especially adept at teaching methods of business functions and management through a positive, and flexible teaching style with the willingness to work beyond the call of duty. Committed to ongoing professional development and spreading the knowledge within myself to the blooming ones to make them fly with a colorful wing of future. I do always believe that more than being a teacher who teaches students subjects,...i rather want to be a teacher who wants to teach students how to love learning.. Subjects i handle : Business studies Management studies Operations Management Organisational Behaviour Change Management Research Methodology Strategy Management Economics Human Resource Management Performance Management Training International Business Business Ethics Business Communication Things you can expect from me : - A clear cut answer - A detailed conceptual way of explanation - Simplified answer form of complex topics - Diagrams and examples filled answers
4.90+ 46+ Reviews 54+ Question Solved
Related Book For  book-img-for-question
Options Futures and Other Derivatives

Options Futures and Other Derivatives

ISBN: 978-0134472089

10th edition

Authors: John C. Hull

See More Books
Question Posted:
See More Questions

Related Video

A put option is a financial contract that gives the owner the right, but not the obligation, to sell an underlying asset, such as a stock or a commodity, at a predetermined price, known as the strike price, on or before a specific date, known as the expiration date. Put options are used by investors as a form of insurance against a decline in the value of the underlying asset. If an investor expects the value of an asset to fall in the future, they can purchase a put option on that asset. If the value of the asset does fall, the put option will increase in value, allowing the investor to sell the asset at the higher strike price. For example, if an investor owns 100 shares of a stock that is currently trading at $50 per share, they may purchase a put option with a strike price of $45 and an expiration date three months in the future. If the stock price falls to $40 before the expiration date, the investor can exercise the put option and sell their shares for $45 each, even though the market price is only $40. This would allow the investor to limit their losses. It\'s important to note that purchasing a put option involves paying a premium to the seller of the option, and the investor can lose the entire premium if the price of the underlying asset does not decline as expected. Put options are just one type of financial derivative and should only be used by experienced investors who understand the risks involved.

Students also viewed these Corporate Finance questions

Venus Planets In Our Solar System 1st Edition - ISBN: 168280593X - Free Book