Show that the delta of an at-the-money European call option in the Black-Scholes model is at least

Question:

Show that the delta of an at-the-money European call option in the Black-Scholes model is at least 1/2. What about the delta of an at-the-money put?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Derivatives Principles And Practice

ISBN: 9780078034732

2nd Edition

Authors: Rangarajan Sundaram

See More Books

Question Posted: Jan 10, 2024 01:00 AM

See More Questions

The Internet has evolved over the years and companies need to keep up with the technologies driving this evolution in order to stay current. Do you think that companies should continue to change...
What does the Black-Sholes-Merton stock option pricing model assume about the probability distribution of the stock price in one year? What does it assume about the continuously compounded rate of...
12) Passcode Incorporated acquired 90% of Safe Systems International for $540,000, the market value at that time. On the date of acquisition, Safe Systems showed the following balances on their...
Comparative figures from the statement of profit or loss of Misty Ltd are shown below: 2017 2016 Revenue (all sales) Cost of sales $450 000 292 300 $390 000 287 000 Gross profit Expenses (including...
Cis-l, 2-Dimnethylcyclohutane is less stable than its transisomer, hut cis-1, 3- dimethylcyclobutanc is more stable than its transisomer. Draw the most stable conformations of both, and explain.
On February 1, the Miro Company needs to purchase some office equipment. The company is presently short of cash and expects to be short for several months. The company treasurer has indicated that he...
Flash Ltd manufactures eReaders and is considering expanding production. A distributor has asked the company to produce a special order of 6000 eReaders. The eReaders will be sold using a different...
On August 1, Cimino Company had the following balances in its inventory accounts: Materials Inventory ......... $16,350 Work-in-Process Inventory ...... 21,232 Finished Goods Inventory ....... 15,200...
There were 3,110 new cases of COPD in Alabama in 2021, and the population at risk was 5,004,000. The total number of individuals living with COPD in Alabama (including the newly diagnosed cases)...
What happens to the delta of an at-the-money call as the time-to-maturity declines? What about a put?
(Repeat for puts) On December 1, the S&P 500 index (SPX) is trading at 1396.71. The prices of put options on the index expiring on March 16 (i.e., a little over three months) are as follows: Assuming...
If y = A sin(Bx C) + D, A 0, for what values of D will the graph lie completely below the x-axis?
Explain how establishing a climate of trust, developing teamwork, and promoting cooperation can help develop the group.
Sam and Tashie have been married for 12 years. Sam wants to quit his job because he is bored and believes they had an agreement that he would be able to complete his education after they had been...
Think of a current or recent problem you have encountered. Analyze your problem by identifying its component parts (present situation, obstacles, and goal). Pay particular attention to the obstacles...
Members of the Advisory Council of the College of Arts and Humanities where one of us works met one year to discuss creative fund-raising ideas to enhance the colleges endowment for student...
Describe brainstorming, synectics, and appreciative inquiry, and explain how they can be used to help enhance group creativity.
A company purchases an asset that costs $10,000. This asset qualifies as three-year property under MACRS. The company uses an after-tax discount rate of 12 percent and faces a 40 percent income-tax...
Give an example of transitory income. What effect does this income have on the marginal propensity to consume?
To complete your last year in business school and then go through law school, you will need $10,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $10,000 one...
While Mary Corns was a student at the University of Tennessee, she borrowed $12,000 in student loans at an annual interest rate of 9 percent. If Mary repays $1,500 per year, how long, to the nearest...
You need to accumulate $10,000. To do so, you plan to make deposits of $1,250 per year, with the first payment being made a year from today, in a bank account that pays 12 percent annual interest....
Replacing old equipment at an immediate cost of $80,000 and an additional outlay of $10,000 four years from now will result in savings of $21,000 per year for 6 years. The required rate of return is...
Determine the purchase price at the indicated time before maturity of the following bond redeemed at par shown in the table below. Bond Rate Par Value Payable Semi-Annually $38,000 9.5% Time Before...
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Year 1 2 3...

Show that the delta of an at-the-money European call option in the Black-Scholes model is at least

Question:

Step by Step Answer:

The delta of a call in the BlackScholes model is given by Nd 1 w...View the full answer

Derivatives Principles And Practice

Students also viewed these Engineering questions