Question 3 You are interested in buying shares of Tesla, but the stock was very volatile...
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Question 3 You are interested in buying shares of Tesla, but the stock was very volatile lately and you are afraid that it might significantly drop in value. To protect your investment, you would like to buy protective put options on Tesla with the strike price of $860. Options will expire in 6 months. The current price of Tesla is $873. The volatility of Tesla is 80% per year and the current risk free rate is 2%. 1. Use the Black Scholes option pricing formula to find the price of this put option. a. Show all formulas that you use b. Show how you plug data given in this problem into these formulas. 2. Use the put-call parity to find the price of the European call option on Tesla with the same exercise price and time to expiration. ay Question 3 You are interested in buying shares of Tesla, but the stock was very volatile lately and you are afraid that it might significantly drop in value. To protect your investment, you would like to buy protective put options on Tesla with the strike price of $860. Options will expire in 6 months. The current price of Tesla is $873. The volatility of Tesla is 80% per year and the current risk free rate is 2%. 1. Use the Black Scholes option pricing formula to find the price of this put option. a. Show all formulas that you use b. Show how you plug data given in this problem into these formulas. 2. Use the put-call parity to find the price of the European call option on Tesla with the same exercise price and time to expiration. ay
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1 Price of the Put Option Using BlackScholes a Formulas BlackScholes formula for puts C S Nd1 K erT ... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1118845899
3rd edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
Posted Date:
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