2. Consider a chooser option where the holder has the right to choose between a European call and a European put at any time during a 2-year period. The maturity dates and strike prices for the calls and puts are the same regardless of when the choice is made. Is it ever optimal to make the choice before the end of the 2-year period? Explain your answer.
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- Assume that the price of a forward contract is 127.87. The European options on the forward contract has an exercise price $150, expiring in 60 days. 3.75% is the continuously compounded risk-free rate, and volatility is 0.33.A. Using the Black model, calculate the price of a call option on a forward contract.B. Calculate the underlying asset's price. Using the Black-Scholes-Merton model, determine the price of a call option on the underlying asset. Should this pricing be any different from the one calculated in letter A? Explain your answer.C. Using the Black model, calculate the price of a put option on a forward contract.D. Using the Black-Scholes-Merton model, compute the price of a put option on the underlying asset. Should this pricing be any different from the one calculated in letter C? Explain your answer.You are considering a European put option and a European call option on ABC Ltd and have available the following information. The put option with an exercise price of $15 and time to maturity of 60 days is priced at $2.00. The call option with the same exercise price and time to maturity is priced at $3.00. The underlying asset price is $15. The risk-free rate is 2% per 60 days. Could an arbitrage profit be earned? If so, how much the arbitrage profit is? Show your works (Hint: use discrete put-call parity equation and consider two scenarios for stock price at maturity of the options: $10 or $20).Assume that the price of a forward contract is 127.87. The European options on the forward contract has an exercise price $150, expiring in 60 days. 3.75% is the continuously compounded risk-free rate, and volatility is 0.33. Using the Black model, calculate the price of a call option on a forward contract.
- Assume that the price of a forward contract is 127.87. The European options on the forward contract has an exercise price $150, expiring in 60 days. 3.75% is the continuously compounded risk-free rate, and volatility is 0.33. Using the Black model, calculate the price of a put option on a forward contract.A put option with an exercise price of $56 will expire in 180 days. The underlying asset price of today is $160 . The underlying asset price at expiration is $126. The risk-free rate is 2%, What is the lower bounds for an European put?which one is correct please confirm? Q9: An option that gives the owner the right to buy a financial instrument at the exercise price within a specified period of time is a call option put option American option European option
- Assume that the price of a forward contract is 127.87. The European options on the forward contract has an exercise price $150, expiring in 60 days. 3.75% is the continuously compounded risk-free rate, and volatility is 0.33. Calculate the underlying asset's price. Using the Black-Scholes-Merton model, determine the price of a call option on the underlying asset.Assume that the price of a forward contract is 127.87. The European options on the forward contract has an exercise price $150, expiring in 60 days. 3.75% is the continuously compounded risk-free rate, and volatility is 0.33. Using the Black-Scholes-Merton model, compute the price of a put option on the underlying asset.Choose all expressions that accurately complete the statement below: Writing a European call option on £10,000 at a strike price of $1.80/£ and a premium of $0.02/£: Group of answer choices Obligates the optionholder to purchase £10,000 for $18,000 USD. Will be profitable for the seller when the price of the GBP exceeds the put-call parity rate. Obligates the writer to sell £10,000 on the expiration date if the optionholder chooses to exercise. Allows the optionholder to exercise the option at any point up to the expiration date. Earns the seller a premium of $200.
- Assume the spot Swiss franc is $0.7015 and the six-month forward rate is $0.6980. What is the Value of a six-month call and a put option with a strike price of $0.6815 should sell for in a rational market? Assume the annualized six-month Eurodollar rate is 3.50 percent. Assume the annualized volatility of the Swiss franc is 14.20 percent. Use the European option-pricing models to value the call and put option. This problem can be solved using the FXOPM.xls spreadsheet. (Do not round intermediate calculations. Round your answers to 2 decimal places.)A European put option contract with an exercise price of $1.65 per pound and a contract size of £32,000 is currently trading at a premium of $0.18 per pound. Required: a-1. If you buy this contract, what spot exchange rate at maturity will maximize your profit? a-2. If you buy this contract, what is the amount of the maximum possible profit from one contract? b. If you buy this contract, what is your maximum possible loss from one contract? c. If you sell this contract, what is your maximum possible profit on this contract? d-1. If you sell this contract, what is your maximum possible loss from one contract? d-2. At what future spot exchange rate will you maximize your loss? e. At what future spot exchange rate, will either the buyer or seller of this contract break even?Assume that K=61, St =65, t = 0.25 (i.e. time to expiry is 3 months), and the risk-free rate is 0.04. The current price of the put option is p = 4. What would the price of the call option ‘c’ need to be for put-call parity to hold?