Question: Question 2 (Total: 20 marks) (a) The Black-Scholes framework is assumed. Consider a 10-month at-the-money European put option on futures contract. (i) Derive a formula

Question 2 (Total: 20 marks) (a) The Black-Scholes framework is assumed.

Question 2 (Total: 20 marks) (a) The Black-Scholes framework is assumed. Consider a 10-month at-the-money European put option on futures contract. (i) Derive a formula for the put option. Express your answer in its simplest form. (3 marks) (ii) It is known that at a strike price of 20, the price of the put option in part (a)(i) is 2.9. Find o, correct to two decimal places, assuming a continuously compounded risk-free interest rate of 10% per annum. (3 marks) (iii) Five months from now, the futures price is 18.9. Calculate the price of the put option at that time. (4 marks) Question 2 (Total: 20 marks) (a) The Black-Scholes framework is assumed. Consider a 10-month at-the-money European put option on futures contract. (i) Derive a formula for the put option. Express your answer in its simplest form. (3 marks) (ii) It is known that at a strike price of 20, the price of the put option in part (a)(i) is 2.9. Find o, correct to two decimal places, assuming a continuously compounded risk-free interest rate of 10% per annum. (3 marks) (iii) Five months from now, the futures price is 18.9. Calculate the price of the put option at that time. (4 marks)

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