You use a forward binominal tree to price options on a futures contract. You are given: i) The period is 1 year ii) The volatility of the futures price is 30% iii) The initial futures price is 100 iv) The continuously compounded risk-free rate is 3% Calculate the price of a one-year 110-strike European call option on the futures contract. A. 8.68 B 9.13 C 10.32 D 11.54 E 12.06
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You use a forward binominal tree to price options on a futures contract. You are given: i) The period is 1 year ii) The volatility of the futures price is 30% iii) The initial futures price is 100 iv) The continuously compounded risk-free rate is 3% Calculate the price of a one-year 110-strike European call option on the futures contract.
A. 8.68
B 9.13
C 10.32
D 11.54
E 12.06
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- A Futures price is currently €80. Over each of the next two 3 month periods it will rise or fall by 10%. The risk free rate is 8% p.a. (i)Using replicating portfolio techniques, find the value of a 6 month European call option on the futures with strike €80. (ii)Verify your answer using risk-neutral valuation. (iii) Would your answer change if the call was American? is this question valued as a future or a call option ? As in which FormulaA Futures price is currently €80. Over each of the next two 3 month periods it will rise or fall by 10%. The risk free rate is 8% p.a. (i)Using replicating portfolio techniques, find the value of a 6 month European call option on the futures with strike €80. (ii)Verify your answer using risk-neutral valuation. (iii) Would your answer change if the call was American?A Futures price is currently €80. Over each of the next two 3 month periods it will rise or fall by 10%. The risk free rate is 8% p.a. (i)Using replicating portfolio techniques, find the value of a 6 month European call option on the futures with strike €80. (ii)Verify your answer using risk-neutral valuation. (iii) Would your answer change if the call was American? Why does part i and ii have different answers in the uploaded solution? If the question is asking to verify it should have the samer answer
- A 3-month European call on a futures has a strike price of $100. The futures price is $100 and the volatility is 20%. The risk-free rate is 2% per annum with continuous compounding. What is the value of the call option? (Use Black-Scholes-Merton valuation for futures options)Consider a European Call Option with a strike of 82. The current price of the underlying asset is 80, and the time to expiry is 5 months. The current market price of the option is 6.22. The risk-free rate is 4.1%. (a) Find the implied volatility of the underlying. Provide all necessary calculations.Find the price of an American call option on a futures if the current spot price is 30, the exercise price is 25, the futures price is 33.70, the risk-free interest rate is 6 percent, the spot asset can go up by 10 percent or down by 8 percent per period and the call expires in two periods, which is also when the futures expires. Show your working. A. 9.98 B. 8.70 C. 7.73 D. 8.22
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- The futures price of an asset is currently 80 and the risk-free rate is 4%. A six-month put on the futures with a strike price of 85 is currently worth 6.5. What is the value of a six-month call on the futures with a strike price of 85 if both the put and call are European? What is the range of possible values of the six-month call with a strike price of 85 if both put and call are American? Show all work and briefly discuss.You are planning to make a hedging. The standard deviation of semiannual changes in a futures price on the gold is $0.96. The standard deviation of semiannual changes of the gold price is $0.87 and the coefficient of correlation between the two changes is 0.9. What is the optimal hedge ratio for a 6-month contract? Choose correct answer: a. The optimal hedge ratio is 0.8352 b. The optimal hedge ratio is 0.1 c. The optimal hedge ratio is 0.9931 d. The optimal hedge ratio is 0.8156Suppose that the futures price is 20 the strike place of nine month European call on the futures is $19 and the frisky rate is 8% per annum and the value of the option is three dollars. What is the value of the put option with the same street, price and time to maturity.