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?
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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?
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- What is the risk-neutral valuation of a six-month European put option to sell a security for a price of 100 when the current price is 105, the interest rate is 10%, and the volatility of the security is .30?The market price of a 1000-share European put option contract is $6200. The expiration date of the put option is one year from today. On that date, the price of the underlying stock will be either $50 or $32. The two states are equally likely to occur. Currently, the stock sells for $40; its strike price is $42. Suppose you are able to borrow money at 10% annual rate. Is there an arbitrage chance? How can you earn risk-free profit?Assume the spot Swiss franc is $0.7085 and the six-month forward rate is $0.7120. What is the Value of a six-month call and a put option with a strike price of $0.6885 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.
- Consider a six-month European call option on the spot price of gold, that is, an option to buy oneounce of gold in the spot market in six months. The strike price is $1, 200, the six-month futuresprice of gold is $1, 240, the risk-free rate of interest is 5% per annum, and the volatility of thefutures price is 20%. The option is the same as a six-month European option on the six-monthfutures price. Calculate the value of this option.Suppose we have both a European call option and put option with an exercise price of $53 and the underlying stock is currently priced at $50. We are to note also that both options will expiry in six months. Further, market surveys suggest that the price of the stock can either go up by 20% or decrease by 25%. The current risk-free rate of interest is 2% per annum. Required: (a) What is the expected price of the underlying asset at expiry date? (b) What is the value of the call option, using the binomial model? (c) If the put option is selling for $4.80, what should be the price of the call option to avoid arbitrage?Suppose we have both a European call option and put option with an exercise price of $53 and the underlying stock is currently priced at $50. We are to note also that both options will expiry in six months. Further, market surveys suggest that the price of the stock can either go up by 20% or decrease by 25%. The current risk-free rate of interest is 2% per annum. (a) What is the expected price of the underlying asset at expiry date? (b) What is the value of the call option, using the binomial model? (c) If the put option is selling for $4.80, what should be the price of the call option to avoidarbitrage?
- You buy a European put option priced at $0.025/€ on €225,000 at a strike price of $1.50/€. If at maturity, the observed price is $1.60/€, what is the total net cash flow involved at the end of this investment whether you exercise or do not exercise this option?A speculator is considering the purchase of a 6-month Swiss franc call option on 50,000 francs with a strike price of $1.0885/SFr The premium is $0.0075/Sfr. The spot price is $1.0822/Sfr and the 60-day forward rate is $1.0880/SFr. The speculator believes the Franc will appreciate to $1.0994/Sfr over the next six months. What is the profit or loss if the franc appreciates only to the forward rate at the end of the 6 months? A. $170 B. -$235 C. $450 D -$375What is the risk-neutral valuation of a six-month Euro-pean put option to sell a security for a price of 100 when the current priceis 105, the interest rate is 10%, and the volatility of the security is .30?
- 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.)An investor is considering to sell European call options on XYZ Company for $1.50 per option. Curren market price is $17.70 on 6 April 2020, the exercise price is $20, and maturity of each option is 6 months. How many call options should the investor sell to raise a total capital of $1,260,000?You buy a European call option priced at $0.025/€ on €225,000 at a strike price of $1.50/€. If at maturity, the observed price is $1.60/€, what is the total net cash flow involved at the end of this investment whether you exercise or do not exercise this option?