Uniform distribution The stock of Zz is currently trading at $1,000. You think the price will follow
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Uniform distribution The stock of Zz is currently trading at $1,000. You think the price will follow a UNIFORM distribution centered at the current price level.
a. Assuming a mean absolute deviation of $400. What is the probability of a CALL with a strike price of $1,200 expiring ITM.
b. With MAD at 400, what is the average CALL payment when the CALL expires ITM.
c. Using information from Qla and Q1b, how much should you pay for the CALL?
d. Current stock price is $1,000. If you observe a PUT with a strike price of $800 priced at $25, what is the implied mean absolute deviation
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