You are given the following information about a non-dividend-paying stock: (i) The current stock price is 100.
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Question:
You are given the following information about a non-dividend-paying stock:
(i) The current stock price is 100.
(ii) The stock-price process is a geometric Brownian motion.
(iii) The continuously compounded expected return on the stock is 10%.
(iv) The probability that the call will be exercised is 0.242
Consider a nine-month 125-strike European call option on the stock.
a) Calculate The stock’s volatility.
b) Justify your result
Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
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