The price of a non-dividend paying stock is now $52, and its annual volatility is 30%. The
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Question:
The price of a non-dividend paying stock is now $52, and its annual volatility is 30%. The risk-free interest rate is 4% per annum with continuous compounding.
- Calculate the BSM value of a three-month European call option with a strike price of $50
- Calculate the BSM value of a three-month European put option with a strike price of $50
- Verify that put-call parity holds for the call and the put option
Black Scholes Merton (BSM) Formulae
N(-di) = 1 – N(di)
N(0.403138) = 0.656577, N(0.253138) = 0.599919
N(-0.403138) = 1 - N(0.403138) = 0.343423, N(-0.253138) = 1 – N(0.253138) = 0.400081
Related Book For
An Introduction to the Mathematics of financial Derivatives
ISBN: 978-0123846822
2nd Edition
Authors: Salih N. Neftci
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