You are given the following information: (i) The current price of the stock is 45 per share.

Question:

You are given the following information:

(i) The current price of the stock is 45 per share.

(ii) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 2%.

(iii) The price of a 9-month at-the-money European call option on the stock is 3.

(iv) The continuously compounded risk-free interest rate is 4%.

Calculate the current price of a 9-month 45-strike European straddle.

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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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You are given the following information: (i) The current price of the stock is 45 per share.

Question:

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The long 9month 45strike straddle comprises a l...View the full answer

Derivative Pricing

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