At the beginning of the year, a speculator purchases a six-month geometric average price call option on

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At the beginning of the year, a speculator purchases a six-month geometric average price call option on a company’s stock. The strike price is 3.5. The payoff is based on an evaluation of the stock price at each month’s end.

Date January 31 February 28 March 31 April 30 May 31 June 30 Stock Price 1.27 4.11 5.10 5.50 5.13 4.70

Based on the above stock prices, calculate the payoff of the option.

(A) Less than .3

(B) At least .3, but less than .75

(D) At least 1.00, but less than 1.75

(E) At least 1.75

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Derivative Pricing

ISBN: 9780367734213

1st Edition

Authors: Ambrose Lo

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Question Posted: Nov 24, 2023 10:31 PM

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At the beginning of the year, a speculator purchases a six-month geometric average price call option on

Question:

Date January 31 February 28 March 31 April 30 May 31 June 30 Stock Price 1.27 4.11 5.10 5.50 5.13 4.70

Step by Step Answer:

B The geometric average is Th...View the full answer

Derivative Pricing

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