Consider a 4 month European put on a stock with no dividend the follow- ing parameters:...

Transcribed Image Text:

Consider a 4 month European put on a stock with no dividend the follow- ing parameters: S(0) = 305, K = 300, r = 0.08, o = 0.25 (a) Compute the option's vega (b) If o increases by 0.01, what is the approximate increase in the value of the option? Consider a 4 month European put on a stock with no dividend the follow- ing parameters: S(0) = 305, K = 300, r = 0.08, o = 0.25 (a) Compute the option's vega (b) If o increases by 0.01, what is the approximate increase in the value of the option?

Answer rating: 100% (QA)

To compute the options vega we need to use the BlackScholes formula for European options The vega re... View the full answer