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Suppose today is the 25th of August 2021. The January 20th, 2023, call option on Amazon.com, Inc. (AMZN) common stock is priced at $426.80. The
Suppose today is the 25th of August 2021. The January 20th, 2023, call option on Amazon.com, Inc. (AMZN) common stock is priced at $426.80. The exercise price of the call option is $3,300. The expiry date of the option is January 20th, 2023. The 25th of August 2021 price of Amazon.com, Inc. common stock is $3,299.18. The risk-free rate is 1.70%. You are required to derive the implied volatility o (sigma) of the underlying asset from the current market price of the January 20th, 2023 call option on Amazon.com, Inc. common stock. 3 Assume an 18% starting value for o to set up a theoretical model of the price of the call option. Assume the stock does not pay a dividend before the expiry date. Comment on the results
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