An investment bank has written a number, N, of European call options on a non-dividend paying stock with strike price R250, current stock price R150, time to expiry of 3 years and an assumed continuously - compounded interest rate of 4% p.a. The bank is delta-hedging the option position assuming the Black-Scholes framework holds and currently holds 160,000 shares of the stock and is short R 15, 500 000 in cash.

(i) By using the hedging position and the Black-Scholes formula for the value of the option, derive two equations satisfied by N and stigma , the banks assumed volatility. [4] (ii)

Estimate by interpolation. [8] without excel or software by guessing the volatility/stigma. Guessing the appropriate % for stigma

(iii) Deduce the value of N. [3] worked out. No theoretical answer. May i please get help with this question that I keep asking but only get theoretical answers. It is a financial economics question that requires calculation and using y1=ax1+bv, calculating d1 and d2 etc. The two equations are: delta=160 000 and B= 15 500 000