Assume the Black-Scholes framework. For a 3-month 80-strike European put option on a nondividend-paying stock, you are

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Assume the Black-Scholes framework. For a 3-month 80-strike European put option on a nondividend-paying stock, you are given:

(i) The current price of the stock is 75.

(ii) The current price of the put option is 6.168.

(iii) The continuously compounded risk-free interest rate is 5%.

The price of the stock suddenly increases to 78. Using the delta approximation, you find that the put price decreases to 4.253.

Using the delta-gamma approximation, calculate the price of the put.

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Derivative Pricing

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Authors: Ambrose Lo

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Question Posted: Nov 22, 2023 08:17 AM

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Assume the Black-Scholes framework. For a 3-month 80-strike European put option on a nondividend-paying stock, you are

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Calculate the delta The delta of the put option is the rate of change of the option price with respe...View the full answer

Derivative Pricing

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