Can someone please help me as soon as possible? Attachment is provided. Specific help is needed on the following problems by 11 pm central time

3 Check the following combinations of puts and calls, and determine whether they conform to the put-call parity rule for European options. If you see any violations, suggest a strategy. P + S C + PV(X) Difference July 155 August 160 October 170 NOTE: add extra columns as you see fit, however, please make the last 3 columns of your work the ones as shown for P+S, C + PV(X) and Difference For each of the following, you do not need a complex strategy explanation. Simply observe if there is an arbitrage opportunity. If the opportunity exists, use one of the strike prices as an example and explain what you would do to make a risk free profit, and say what that risk free profit would be.

4 Examine the following pairs of calls, which differ only by exercise price. Determine whether any violate the rules regarding relationships between American options that differ only by exercise price. State the rule(s), then examine whether the pair of calls violates the rule(s) a) August 155 and 160 b) October 160 and 165 Rules:

For the following problems, decide if you would exercise each option or not. Option type Exercise Price Current Stock Price Exercise? Example: Call $125.00 $128.00 yes, S > X

Put $125.00 $128.00

Put $125.00 $125.00

Put $125.00 $123.00

Call $125.00 $128.00

Call $125.00 $125.00

Call $125.00 $123.00

Before you work the homework problems (see next tab), review the The following option prices were observed for a stock on July 6 of a particular year. Use this information for the following problems. Unless otherwise indicated, ignore dividends on the stock. The stock is priced at: $ 165.13 The expirations and associated risk free rates for each term are: These are expiration dates Date 17-Jul 21-Aug 16-Oct Strike 155 160 165 170 Rate 5.16% These are the risk free interest rates for the periods, each is quoted on an annual basis. You will be calculating the 5.50% days to expiration in order to determine the PV of the exercise prices. 5.88% Jul 10.50 6.00 2.70 0.80 Calls Aug 11.80 8.10 5.20 3.20 Oct 14.00 11.10 8.10 6.00 Jul 0.20 0.75 2.35 5.80 Puts Aug 1.25 2.75 4.70 7.50 Oct 2.75 4.50 6.70 9.00 Example using the October 165 options The first step is to identify the values you need to solve the various problems presented here: Exercise price $ 165.00 Current stock price $ 165.13 Price for the call 8.10 Time to option expiration (today is given as July 6 and the option exp Price for the put 6.70 1) October 16 (2016) expressed as a number Risk free rate of interest applicable for these options 5.88% 2) July 6 (2016) expressed as a number 3) Days between "today" and option expiration 4) time to expiration, in years = days/365 a) Intrinsic value of a call Time value of a call PV of Exercise price = Lower bound of European call $ 0.13 Intrinsic value of a call = Max(0,S-X) $ 7.97 Time value of a call = Max(0,call price - intrinsi $ 162.39 PV of X = X/(1 + Rf)^T, or X*(1+ Rf)^(-T) $ 2.74 Lower bound on European call - Max(0,S-prese b) Intrinsic value of a put Time value of a put Lower bound of European put $ $ $ c) Do the October 165 options follow put-call parity? We need to test, does P + S = PV(X) + C? P+S= PV(X) + C = $ 171.83 $ 170.49 - Intrinsic value of a put = Max(0,X-S) 6.70 Time value of a call = Max(0,put price - intrinsi - Lower bound on European put - Max(0,presen Difference $ 1.34 Arbitrage strategy: Because the put plus S is greater than the PV of the exercise price + the call, we would go sho At the same time, we would purchase the underpriced elements: we buy a risk-free bond worth the PV of X and We make a risk free profit of $1.34 (assuming no transactions costs). ab), review the examples shown here. s July 6 and the option expir date is given with the rates, it is October 16) 10/16/2016 7/6/2016 102 =Octoer 16th date - "today", see equation 0.28 ll = Max(0,S-X) Max(0,call price - intrinsic value) T, or X*(1+ Rf)^(-T) opean call - Max(0,S-present value of X) ut = Max(0,X-S) Max(0,put price - intrinsic value) opean put - Max(0,present value of X -S) the call, we would go short (sell) one put option and one share of stock. ond worth the PV of X and also buy a call. The following option prices were observed for a stock on July 6 of a particular year. Use this information for the following problems. Unless otherwise indicated, ignore dividends on the stock. The stock is priced at: $ 165.13 The expirations and associated risk free rates for each term are: Date 17-Jul 21-Aug 16-Oct Rate 5.16% 5.50% 5.88% Strike 155 160 165 170 Jul 10.50 6.00 2.70 0.80 Calls Aug 11.80 8.10 5.20 3.20 Oct 14.00 11.10 8.10 6.00 Jul 0.20 0.75 2.35 5.80 Puts Aug 1.25 2.75 4.70 7.50 Oct 2.75 4.50 6.70 9.00 1 Compute the interinsic values, time values and lower bounds of the following calls. Identify any profit opportunities that may exist. Treat these as American options for purposes of determining the interinsic vlaues and time values and European options for the purposes of determining lower bounds. Intrinsic Value Points 2 2 2 July 160 October 155 August 170 NOTE: add extra columns as you see fit, however, please make the last 3 columns of your work the ones as shown for intrinsic value, time value and lower bound. 2 Compute the interinsic values, time values and lower bounds of the following puts. Identify any profit opportunities that may exist. Treat these as American options for purposes of determining the interinsic vlaues and time values and European options for the purposes of determining lower bounds. Intrinsic Value 2 2 2 Lower bound Time of European Value Put July 165 August 160 October 170 NOTE: add extra columns as you see fit, however, please make the last 3 columns of your work the ones as shown for intrinsic value, time value and lower bound. Check the following combinations of puts and calls, and determine whether they conform to the put-ca 3 rule for European options. If you see any violations, suggest a strategy. P + S C + PV(X) 2 2 2 Difference July 155 August 160 October 170 NOTE: add extra columns as you see fit, however, please make the last 3 columns of your work the ones as shown for P+S, C + PV(X) and Difference For each of the following, you do not need a complex strategy explanation. Simply observe if there is a If the opportunity exists, use one of the strike prices as an example and explain what you would do to m and say what that risk free profit would be. Examine the following paies of calls, which differ only by exercise price. Determine whether any violat relationships between American options that differ only by exercise price. State the rule(s), then exam 4 violates the rule(s) 1 a) August 155 and 160 1 b) October 160 and 165 Rules: For the following problems, decide if you would exercise each option or not. Example: 1 0.75 0.75 1 0.75 0.75 25 Option type Call Put Put Put Call Call Call Current Stock Exercise Price Price Exercise? $125.00 $128.00 yes, S > X $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $128.00 $125.00 $123.00 $128.00 $125.00 $123.00 a particular year. ated, ignore dividends owing calls. Identify s for purposes of for the purposes of Time Value columns of your work owing puts. Identify s for purposes of for the purposes of Lower bound of European Call columns of your work ther they conform to the put-call parity columns of your work on. Simply observe if there is an arbitrage opportunity. explain what you would do to make a risk free profit, Determine whether any violate the rules regarding e. State the rule(s), then examine whether the pair of calls on or not