Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

An at the money 3-month call option on the XYZ stock is currently trading at $52.82 on CBOE. An investor wishes to price a three-month

An at the money 3-month call option on the XYZ stock is currently trading at $52.82 on CBOE. An investor wishes to price a three-month put option on XYZ stock. Suppose, the put is also at the money (i.e. currently the price of the stock is exactly the same as the exercise price of the option written on this stock.) Take the volatility of the return on SPX to be 15% and the risk-free rate to be 6%. Find the price of the put option.

1. Find the price of the put option, using put call parity

2. Find the price of the put option using Black Sholes option pricing formula for puts

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance Building Your Future

Authors: Robert B. Walker, Kristy P. Walker

1st edition

9780077861728, 978-0073530659

More Books

Students also viewed these Finance questions