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Consider a European put option that expires in four weeks with an exercise price of $120 trading

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Consider a European put option that expires in four weeks with an exercise price of $120 trading on a stock currently priced at $126.30. Assuming an annualized volatility of the continuously compounded return on the stock of 0.78 and a continuously compounded risk-free rate of 0.0348, use the Black-Scholes-Merton model applied to European puts to price the option?
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We are given X 120 S 0 12630 r c 00348 and T 28365 00767 The BlackScholesMerton model for Euro...View the full answer


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Anandh Ravindharan
A computation fanatic who admires the magic and miracles of science in the near vicinity from the spring time of life. On a search for higher education, spotted out mechanical engg, a study with detailed experiments and calculations, and geared it with some innovative and social projects. Once after the academics, have experienced as a professional Mechanical Engineer in a fortune 500 FMCG organization for 1+ years under Projects and Plant Engineering Department. Achievements in an FMCG Industry: · Mastered on a Civil & Structural project worth INR 3 million and assisted on a major Civil & Machinery project worth INR 350 million · Selected and trained on New Product Development (NPD) Activities at corporate head office, Gurgaon · Introduced & Made technical comparison for more than 30 Capex Purchase Orders worth INR 9 million · Developed In-house canteen facilities in the aspect of civil, electrical and machineries · Installed two Fall Arrest Systems, right from design till commissioning · With precise calculation and analysis, increased the Inventory storage capacity of Engg Stores to 412% of existing · Introduced a booklet with the details of all machineries in the plant · Introduced creative solutions for problems faced in plant – which includes customized cattle grid, methods to reduce energy and water consumption. Then, went up ahead and fulfilled the pedagogical dream by slicing the knowledge with the secondary kids in an innovative teaching methodology with an Educational NPO, that has involved in the process of inducing the Creativity and Innovation among the young minds through a Transformational Creativity Workshop, where students will be exposed to some handmade innovative projects, in the theme of Sustainable living, Green Energy, Advancement in technologies (Robotics, E-bike) and Solar Energy. Have mentored more than 1200 students practically in the past 2 years. My teaching methodology will be in an empirical way where students will be put on the shoes of the concepts and will be induced to come out with the solutions through brain storming. This methodology helps them to acquire the answers from their perspective which lasts for a long term than conventional problem solving techniques. Also, Been as one of the two key players and organized a remarkable Dream Awareness Event – Ore Kana, by displaying the dream of more than 5000 participants in art form, to imprint the importance of dream among the students and public. (As a drive to Dr. APJ Abdul Kalam’s vision – India 2020) On the whole, I can brief myself as an an ardent learner and also an analytic analyzer who is passionate on building the educational system by exploring on different teaching techniques.
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A put option is a financial contract that gives the owner the right, but not the obligation, to sell an underlying asset, such as a stock or a commodity, at a predetermined price, known as the strike price, on or before a specific date, known as the expiration date. Put options are used by investors as a form of insurance against a decline in the value of the underlying asset. If an investor expects the value of an asset to fall in the future, they can purchase a put option on that asset. If the value of the asset does fall, the put option will increase in value, allowing the investor to sell the asset at the higher strike price. For example, if an investor owns 100 shares of a stock that is currently trading at $50 per share, they may purchase a put option with a strike price of $45 and an expiration date three months in the future. If the stock price falls to $40 before the expiration date, the investor can exercise the put option and sell their shares for $45 each, even though the market price is only $40. This would allow the investor to limit their losses. It\'s important to note that purchasing a put option involves paying a premium to the seller of the option, and the investor can lose the entire premium if the price of the underlying asset does not decline as expected. Put options are just one type of financial derivative and should only be used by experienced investors who understand the risks involved.

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