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As an expert in pricing financial derivatives, your friend, John, approached you seeking a professional advice on the fair price of the European style call
As an expert in pricing financial derivatives, your friend, John, approached you seeking a professional advice on the fair price of the European style call and put option on the FTSE 100 index. The following data relate to the FTSE 100 index.
Current price | 7125 |
Dividend Yield | 2.95% |
Volatility | 13.25% |
The risk-free rate of interest is 1%.
- Estimate the value of a European exercise call option on the index with an exercise price of 7100 and 100 days to run.
ii) Estimate the value of a European exercise put option on the index with the same exercise price and expiry date.
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