Question
A derivatives dealer has a single transaction with a company which is a long position in a five-year option. The Black-Scholes-Merton value of the option
A derivatives dealer has a single transaction with a company which is a long position in a five-year option. The Black-Scholes-Merton value of the option is $4.75. Suppose that the credit spread on five-year bonds issued by the company is 150 basis points. What is the dealer's CVA per option purchased from the counterparty?
Group of answer choices
$4.41
$0.34
$0.41
$1.29
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
16th edition
125927716X, 978-1259687969, 1259687961, 978-1259277160
