3. Let S = ($100), K = ($120), = 30%, r = 0.08, and =...
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3. Let S = \($100\), K = \($120\), σ = 30%, r = 0.08, and δ = 0.
a. Compute the Black-Scholes call price for 1 year to maturity and for a variety of very long times to maturity. What happens to the option price as T →∞?
b. Set δ = 0.001. Repeat (a). Now what happens to the option price? What accounts for the difference?
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Related Book For 
Derivatives Markets Pearson New International Edition
ISBN: 978-1292021256
3rd Edition
Authors: Robert L. Mcdonald
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