Question: Q2. Option Pricing (15 points) CALL Option has six months left before expiration Underlying currently traded at 1000 with annual IV of 250. CALL

Q2. Option Pricing (15 points) CALL Option has six months left before

Q2. Option Pricing (15 points) CALL Option has six months left before expiration Underlying currently traded at 1000 with annual IV of 250. CALL Strike is 800. Q2a. What is the probability for CALL to expire in the money (5 points)? Q2b. What is the average price of the underlying at expiration conditional on CALL expiring ITM (5 points)? Q2c. Based on Q2a, and Q2b, how much should the CALL be priced at today (3 points)? Q2d. Out of total call price from Q2c, how much is time value and how much is intrinsic value? (2 points) Page 3

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