Question
As a financial analyst at Bank of America Merrill Lynch, you are collecting and analyzing data to find the value for a six month European
As a financial analyst at Bank of America Merrill Lynch, you are collecting and analyzing data to find the value for a six month European call option and put option on BAC stock. The stock price is currently $50. The strike price is $50. It is known that at the end of six months it will beeither $55 or $45. The risk-free interest rate is 12% per year.
a. What is the call option delta?
b. What is the put option delta?
c. What is the probability of an up movement in a risk-neutral world?
d. What is the value of the call option on the stock?
e. What is the value of the put option on the stock?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started