Question
Assume rf = 0 Underling at 100. Annual st dev of $20. 3 months left for the option. Q1. Pricing Under Normal Distribution. PUT has
Assume rf = 0
Underling at 100. Annual st dev of $20. 3 months left for the option.
Q1. Pricing Under Normal Distribution. PUT has a strike of90.
Q1a. What is the z-score for PUT strike?
Q1b. What is the probability for PUT to expire in the money?
Q1c. What is the average price of the underlying at expiration conditional on PUT expiring ITM?
Q1d. What is the average payment of the option conditional on expiring ITM?
Q1e. How much should the 90 strike PUT be priced at?
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
14th edition
133879879, 978-0133879872
