Explain why the Black-Scholes model is inappropriate if the stock can gap.
Question:
Explain why the Black-Scholes model is inappropriate if the stock can gap.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 0% (1 review)
The BlackScholes model is a mathematical model used in financial markets to calculate the theoretica...View the full answer
Answered By
Sultan Ghulam Dastgir
The following are details of my Areas of Effectiveness English Language Proficiency, Organization Behavior , consumer Behavior and Marketing, Communication, Applied Statistics, Research Methods , Cognitive & Affective Processes, Cognitive & Affective Processes, Data Analysis in Research, Human Resources Management ,Research Project,
Social Psychology, Personality Psychology, Introduction to Applied Areas of Psychology,
Behavioral Neurosdence , Historical and Contemporary Issues in Psychology, Measurement in Psychology, experimental Psychology,
5.00+
1+ Reviews
10+ Question Solved
Related Book For
Question Posted:
Students also viewed these Engineering questions
-
Explain why the Black option on futures pricing model is simply a pricing model for options on instruments with a zero cost of carry?
-
The Black-Scholes-Merton Model for European call option on stock and the Black Model for European call option on forward (future) are two pricing models that can potentially be used to determine the...
-
Based on today's quote for ABC stock and option with 6 months to expiration: Current stock price for ABC: 100 Stock pays no dividends. Strike price of call option: 97 Annual risk-free rate: .03...
-
DBU Systems manufactures testing equipment for the communications industry. In developing a new device for maritime communication, the design group has estimated the following unit costs. Metal...
-
A trisubstituted cyclohexane with three substituents? red, yellow, and blue?undergoes a ring-flip to its alternative chair conformation. Identify each substituent as axial or equatorial, and show the...
-
Mountain Pool Supplies merchandise inventory data for the year ended December 31, 2017, follow: Requirements 1. Assume that the ending merchandise inventory was accidentally overstated by $1,300....
-
Using the density function of the stopping time probability for a fixed \(\lambda\), find the average time to the first event over the entire interval \([0, \infty)\).
-
Is the auditor's liability affected if the third party was unknown rather than known? Explain.
-
The weekly demand of fresh oranges, as measured by number of oranges, for a household depends on the price of orange (in dollars) and can be approximated by q(p) = 20-p. Suppose that the supply of...
-
Is assuming a constant (nonstochastic) interest rate in the Black-Scholes model a major deficiency of the model?
-
Is it possible to build a recombining tree if the interest rate is not constant, nor stochastic, but a deterministic function of time, i.e., r(t)?
-
A uniform cylinder of mass 90 kg and radius 0.4 m is mounted so that it turns without friction on its fixed symmetry axis. It is rotated by a drive belt that wraps around its perimeter and exerts a...
-
You are a mentor teacher in an early learning program. Your administrator has asked you to support your team in developing reflective practice as it pertains to observation and assessment. You decide...
-
For the Research Project, each student will select a compelling problem confronting New York City and will analyze it using the problem-solving approach described in Chapter 3 of Thinking Critically....
-
To become a more effective speaker I believe the best strategies are using clarity in your speech, avoiding words that may have different meanings to the audience, avoiding curse words, and using...
-
OUTLINE INSTRUCTIONS Use this template to write your outline. Enter your own information in place of the explanations provided. This outline is used to your speech ideas on paper. Do not use this as...
-
After taking this course do you believe your interpersonal communication will improve or remain the same?
-
Quincey Corporation issued 4,000, 6%, 5-year, $1,000 bonds dated January 1, 2014, at 100. (a) Prepare the journal entry to record the sale of these bonds on January 1, 2014. (b) Prepare the journal...
-
Wal-Mart is the second largest retailer in the world. The data file on the disk holds monthly data on Wal-Marts revenue, along with several possibly related economic variables. a) Using computer...
-
If investors aversion to risk increased, would the risk premium on a high-beta stock increase more or less than that on a low-beta stock? Explain.
-
If a companys beta were to double, would its expected return double?
-
Is it possible to construct a portfolio of stocks which has an expected return equal to the risk-free rate?
-
fluid flow in porous media (petroleum reservoir) Q) Calculate the (order of magnitude of) surface tension of Octane at 293 K. Imagine: 1. The intermolecular interactions for Octane is computed using...
-
Example problem: Following filtration, water in serpentine chlorination basin is dosed with 6 mg/L of free chlorine at Cl. Tracer tests show the following characteristic hydraulic residence times for...
-
r= (-dC/dt) = (kKC)/ (1+KC) In the L-H model, r is the reaction rate in mol/(m3 s), k is the kinetic rate constant, and K is the Langmuir-Hinshelwood constant, which is the ratio of the rate...
Study smarter with the SolutionInn App