Assume the Black-Scholes framework. The current price of a nondividend-paying stock is $60 and the continuously compounded
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Assume the Black-Scholes framework. The current price of a nondividend-paying stock is $60 and the continuously compounded risk-free interest rate is 5%.
Your boss has asked you to quote a price for Put A, which is a 6-month at-the-money European put option on the stock. Although the market price for Put A is not available, the market price of Put B, which is a 6-month 65-strike European put option on the same stock, is observed to be $6.2514, and its delta is −0.5882.
Calculate the price of Put A.
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Given Current stock price S 60 Continuously compounded riskfree interest rate r 5 Time to maturity T ...View the full answer
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