Question

If the volatility of a stock is .33, find the standard deviation of:

(see the attachment for the remainder of the question).

Step 1

Recall the Black Scholes model derivation.

Log of the stock price is normally distributed.

The expected value of ln (S_{T} / S_{0}) is (µ - σ^{2} / 2) x T

Step 2

Hence, standard deviation of ln (ST / S0) is σ x T1/2

Here, T = 1 day = 1/365

Hence, standard deviation of ln [Sd(n) / Sd(n...

Tagged in

Q: I was asked to repost the question. It is as follows: Assume a security follows a geometric Brownia...

A: In mathematical finance, risk neutral is a probability measure used to support in pricing financial ...

Q: You strongly believe that the price of Breener Inc. stock will rise substantially from its current l...

A: Current, stock price, S0 = $ 137Amount to invest, A = $ 13,700Strike price on call option, K = $ 140...

Q: You have $5,000 invested in a bank account that pays a 6percent nominal annual interest with daily c...

A: Amount invested, PV = $ 5,000Interest rate = 6% annual interest rate compounded daily.Hence, interes...

Q: Assume a security follows a geometric Brownian motion with volatility parameter sigma=0.2. Assume t...

A: Given that: The initial price=$25Interest rate is 0%Strike price is $22. volatility parameter sigma ...

Q: If the interest rate per day is 0.014%, then what is the annual rate?

A: Interest rate:An interest rate is a percentage on the principal amount at which a lender gives money...

Q: Countess Corp. is expected to pay an annual dividend of $3.97 on its common stock in one year. The c...

A: Calculating the cost of equity using the formula of dividend discounting model. We have,Current pric...

Q: An experiment can result in any of the outcomes 1, 2, or 3. If there are two different wagers with ...

A: Let's define two matrix as shown on white board.The first matrix is R matrix which shows three possi...

Q: Multinational corporations are exposed to higher risks that primarily come from two significant sour...

A: Expropriation is the act in which taking over of privately owned property by the government.While, ...

Q: Ed Draycutt is the engineering manager of Airway Technologies, a firm that makes computer systems fo...

A: You have asked a case sudy with four sub parts. I will answer the first three sub parts. Please post...

Sorry about that. What wasn’t helpful?