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Consider an eight-month European put option on a Treasury bond that currently has 14.25 years to maturity. The current cash bond price is $910, the
Consider an eight-month European put option on a Treasury bond that currently has 14.25 years to maturity. The current cash bond price is $910, the put exercise price is $900, and the volatility for the bond price is 10% per annum. A coupon of $35 will be paid by the bond in three months. The risk-free interest rate is 8% for all maturities up to one year. Use Blacks model to determine the price of the option.
No Excel Please.
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