Nasdaq, Inc. (Nasdaq or NDAQ) shares closed on December 3, 2021, at USD 200.12 (Nasdaq shares are listed in the Nasdaq market). On the same date, the Yahoo Finance website had the following information regarding Nasdaq options with the maturity date on June 17, 2022: Call | Strike Last Price Bid Ask Open Interest Implied Volatility Put | Strike Last Price Bid Ask Open Interest Implied Volatility 110 -- -- -- -- -- 110 0.60 0.05 1.65 4 54.00% 140 70.50 61.20 64.30 1 46.08% 140 -- -- -- -- -- 150 -- -- -- -- -- 150 2.25 3.00 3.40 3 36.85% 155 53.30 49.90 52.10 0 44.29% 155 2.35 3.60 4.00 16 35.73% 160 43.90 44.00 45.20 1 35.70% 160 3.80 4.30 4.60 52 34.37% 165 -- -- -- -- -- 165 4.20 5.10 5.50 19 33.58% 170 -- -- -- -- -- 170 3.90 6.00 6.70 18 33.18% 175 41.40 30.50 33.60 1 33.63% 175 5.00 7.10 7.60 31 31.75% 180 37.30 28.20 30.70 1 34.24% 180 7.46 8.40 9.00 21 31.10% 185 27.50 24.70 25.80 11 30.61% 185 11.00 9.90 10.50 12 30.29% 190 25.90 21.50 22.60 1 29.98% 190 12.03 11.70 12.40 3 29.86% 195 22.50 18.70 20.20 2 30.39% 195 14.70 13.70 14.60 10 29.57% 200 15.09 16.00 16.80 32 28.67% 200 17.10 15.60 16.70 42 28.72% 210 10.80 11.50 12.20 245 27.86% 210 17.19 21.30 22.70 153 28.95% 220 6.40 8.00 8.60 55 27.24% 220 23.01 27.80 29.00 2 28.21% 230 4.80 5.40 5.90 18 26.76% 230 -- -- -- -- -- 240 2.83 3.50 3.90 68 26.28% 240 -- -- -- -- -- 250 2.49 2.25 2.55 30 26.01% 250 -- -- -- -- -- 260 1.42 1.40 1.70 10 26.06% 260 -- -- -- -- -- 270 0.91 0.85 1.10 16 26.01% 270 -- -- -- -- -- 280 0.60 0.05 0.80 43 26.64% 280 -- -- -- -- -- 290 0.35 0.20 0.45 29 26.03% 290 -- -- -- -- -- 300 0.51 0.05 0.70 11 30.08% 300 -- -- -- -- -- The annual risk-free interest rate on December 3, 2021, was 0.26%. a) Assume that you consider the market volatility will cause a change in the Nasdaqs price level. Define two strategies to profit from your view. The strike price range must be [USD 190; USD 210]. Plot them and show the expected payoffs. Explain your strategy. b) Construct a binomial tree for June 17, 2022, assuming the stock price moves just once and determine the European call option value for a strike price of USD 200? [if necessary, make reasonable assumptions (e.g., no dividends in the period)] 3 c) Construct a more realistic binomial tree for June 17, 2022, assuming the stock price moves 6 times(i.e., every 32.67 days or 784 hours) and determine the European call option value for a strike price of USD 200? [if necessary, make reasonable assumptions (e.g., no dividends in the period)] d) If the standard deviation is 26.56%, determine the European call option value for a strike price of USD 200 with the binomial tree with price moves every 32.67 days. Explain. [if necessary, make reasonable assumptions (e.g., no dividends in the period)] e) Use the Black-Scholes model to determine the value of a European Call option with a strike of USD 200. [if necessary, make reasonable assumptions (e.g., no dividends in the period)] f) Use the Black-Scholes model to determine the implicit volatility on a European Call option with a strike of USD 200. Explain. g) Apply the Call-Put parity to check the value of the European Put option with a strike of USD 200. Should you buy or sell the Put option. Explain. h) Assume Nasdaq will pay a dividend of USD 0.54 per share on March 11, 2022, and June 17, 2022 (open prices are ex-dividend). Construct a binomial tree for June 17, 2022, assuming again that the stock price moves 6 times (i.e., every 32.67 days or 784 hours) and determine the American call option value for a strike price of USD 200? [if necessary, make reasonable assumptions] i) Assume the binomial tree (from exercise h)) holds perfectly. The last price for the American call option with a strike of USD 200 for June 17, 2022, when the stock price moves 6 times (i.e., every 32.67 days or 784 hours), was USD 15.09. Determine the Nasdaq implicit spot price for a no-arbitrage situation. [if necessary, make reasonable assumptions]