The nine-month forward price of the S&P500 index is 3480. The risk-free rate (r) is 3% per annum (continuously compounded) and the volatility () of the index is 15% per annum. You need to calculate the value of a nine-month European call option (with strike price K=3490) on the spot value of the index in index points. Choose the correct approach to the calculation.

Select one:

The European call option you are trying to value, is out-of-the-money, and has zero chance of finishing in-the-money, and so its value is zero.

You would use the standard Black-Scholes-Merton model with inputs, S=3480, T=0.75, K=3490, r=0.03 and =0.15.

You would use the Black model for futures options with inputs, F=3480, T=0.75, K=3490, r=0.03 and =0.15.

To calculate the value of the call option you would need to know the spot value of the S&P 500 index.