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In the Black-Scholes framework, a put option is priced as where p= di d = Ke- N(-d) - SN(-d) S K In +(r+o/2)T T
In the Black-Scholes framework, a put option is priced as where p= di d = Ke- N(-d) - SN(-d) S K In +(r+o/2)T T di A. Derive the expected return and volatility for a put option. Compare the Sharpe ratio of the put to that of the underlying asset and explain the relationship. B. Derive the beta for a put option. Compare it to the beta of the underlying asset and explain the relationship.
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A Expected Return and Volatility of a Put Option The expected return of a put option can be derived as follows ER Ep K TNd2 SNd1 K where Ep is the exp...
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Ro
7th Canadian Edition
007090653X, 978-0070906532, 978-0071339575
