Chapter Review and Self Test Problems

24.1 Put-Call Parity A share of stock sells for $40. The continuously compounded risk-free rate is 8 percent per year. A call option with one month to expiration and a strike price of $45 sells for $1. What's the value of a put option with the same expiration and strike?

24.2 Black-Scholes A share of stock sells for $40. The continuously compounded risk-free rate is 4 percent. The standard deviation of the return on the stock is 80 percent. What is the value of a put option with a strike of $45 and a three-month expiration?

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