Repeat the previous problem, but this time for perpetual options. What do you notice about the prices?
Question:
In previous problem Let S = $100, K = $90, σ = 30%, r = 8%, δ = 5%, and T = 1.
a. What is the Black-Scholes call price?
b. Now price a put where S = $90, K = $100, σ = 30%, r = 5%, δ = 8%, and T = 1.
c. What is the link between your answers to (a) and (b)? Why?
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a Inputs Perpetual Options Stock price 100 Call Exercise pric...View the full answer
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