Bank of Irlandia shares are currently priced at 0.25. A writer of 1 million units of a one year European call option on this stock with an exercise price of 0.20 has hedged the option with a portfolio of 800,000 shares and a loan. The annual risk- free continuously compounded interest rate is 3% (no dividends are payable during the life of the option). (ii) Calculate the value of the delta of the option [1 mark] (iii) Calculate the implied volatility of the stock to within 0.1% p.a. assuming that it is below 100%) [7 marks] (iv) Calculate the price of the option [3 marks] (v) Calculate the current price of a one year European put option with the same features, stating any assumptions that you make [3 marks] (vi) What element appears to be 'missing' from the Black Scholes option pricing formula? Why is it not missing'? [4 marks] Bank of Irlandia shares are currently priced at 0.25. A writer of 1 million units of a one year European call option on this stock with an exercise price of 0.20 has hedged the option with a portfolio of 800,000 shares and a loan. The annual risk- free continuously compounded interest rate is 3% (no dividends are payable during the life of the option). (ii) Calculate the value of the delta of the option [1 mark] (iii) Calculate the implied volatility of the stock to within 0.1% p.a. assuming that it is below 100%) [7 marks] (iv) Calculate the price of the option [3 marks] (v) Calculate the current price of a one year European put option with the same features, stating any assumptions that you make [3 marks] (vi) What element appears to be 'missing' from the Black Scholes option pricing formula? Why is it not missing'? [4 marks]