Underlying stock currently trades at 100 and is lognormally distributed as expiration. Riskfree rate of 0%. Sigma

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Underlying stock currently trades at 100 and is lognormally distributed as expiration. Riskfree rate of 0%. Sigma at 20% annually for log returns. 63 days to go before expiration. Put strike at 90.

Q1a. What is the prob of option expring ITM?

Q1b. What is the avg underlying stock price when put expires ITM?

Q1c. What is the conditional avg put pmt at expiration?

Q1d. How much should the put be priced today?

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Data Analysis and Decision Making

ISBN: 978-0538476126

4th edition

Authors: Christian Albright, Wayne Winston, Christopher Zappe

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Posted Date: Jun 13, 2023 02:50 AM

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Underlying stock currently trades at 100 and is lognormally distributed as expiration. Riskfree rate of 0%. Sigma

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Expert Answer:

To answer your questions we can use the BlackScholes model for options pricing However please note that the BlackScholes model assumes constant volatility and riskfree rate and does not account for di... View the full answer

Data Analysis and Decision Making

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