Question
Consider a 1-year European put on TSLA with a strike price of $400. TSLA spot price is $320 and its volatility is 25%. TSLA is
Consider a 1-year European put on TSLA with a strike price of $400. TSLA spot price is $320 and its volatility is 25%. TSLA is expected to pay no dividend. The risk-free rate is 5%.
(a)Use Black-Scholes-Merton (BSM) model to price this put option. (2 marks)
(b)What is the put delta? If the short position decides to delta-hedge, what would the net cash flow be? (2 marks)
(c)Without using BSM model, what are the 1-year 400-strike straddle price and its delta (2 marks)
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Investments An Introduction
Authors: Herbert B Mayo
9th Edition
324561385, 978-0324561388
