The spot price of a stock is 50. The stock pays dividends continously at a rate...
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The spot price of a stock is 50. The stock pays dividends continously at a rate of 3% per year proportional to its price. European-style 3-month call options have the following BSM-model implied volatility per year o(K = 50) = 20%, o (K = 55) = 22.5%, o (K = 60) = 25%, o(K = 65) = 27.5%, o(K =70) = 30% Thus, the BSM assumptions do not hold in this market. What are the market price of each of these call options? The spot price of a stock is 50. The stock pays dividends continously at a rate of 3% per year proportional to its price. European-style 3-month call options have the following BSM-model implied volatility per year o(K = 50) = 20%, o (K = 55) = 22.5%, o (K = 60) = 25%, o(K = 65) = 27.5%, o(K =70) = 30% Thus, the BSM assumptions do not hold in this market. What are the market price of each of these call options?
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