An option based on a variable that is not traded is called a real option or sometimes

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An option based on a variable that is not traded is called a real option or sometimes a soft option. Find the projection price of the soft option with the following parameters and compare with the option of Example 15.2.

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Data from Example 15.2

Let us calculate the value of the same option that was a 5-month call option on a stock

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Investment Science

ISBN: 9780199740086

2nd Edition

Authors: David G. Luenberger

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Question Posted: Apr 20, 2024 12:11 PM

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An option based on a variable that is not traded is called a real option or sometimes

Question:

K=60, S 62, r = 10%, = 20%, T= 5 months, Me=8%, m=15%, m = 14%, p=0.7

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Investment Science

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