This question is based on the following information on the Black-Scholes (BS) model. Index level...
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This question is based on the following information on the Black-Scholes (BS) model. • Index level = 2107 • Exercise price = 2180 • Time to option maturity = 0.36 years Continuously compounded risk-free rate = 5% • Estimated continuously-compounded dividend yield on the index = 4% per year • Estimated index return standard deviation = 15% If the market put price is $2 higher than the BS price, assume that volatility is estimated correctly, what can we conclude about the estimated dividend yield? This question is based on the following information on the Black-Scholes (BS) model. • Index level = 2107 • Exercise price = 2180 • Time to option maturity = 0.36 years Continuously compounded risk-free rate = 5% • Estimated continuously-compounded dividend yield on the index = 4% per year • Estimated index return standard deviation = 15% If the market put price is $2 higher than the BS price, assume that volatility is estimated correctly, what can we conclude about the estimated dividend yield?
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Related Book For
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan, Richard G Lipsey
Posted Date:
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