On 12 August 2009 Bank of America (BAC) stock closed at $15.93. On the same date, a
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Question:
On 12 August 2009 Bank of America (BAC) stock closed at $15.93. On the same date, a January 2010 call and a put on BAC with exercise price X = 16 traded at $2.25 and $2.37 respectively.
Both options expire 15 January 2010.
• Compute the implied volatility for each of the options.
Assume that the annual, continuously-compounded, interest rate is r = 1.5%
• How do the implied volatilities compare to the annualized historical volatility of BAC returns over the last 5 years? And the last year?
• Assume that put-call parity holds and that the call is priced correctly.
What should be the price of the put?
Related Book For
Statistics for Management and Economics Abbreviated
ISBN: 978-1285869643
10th Edition
Authors: Gerald Keller
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