Question
. The spot price of Facebook (FB) is $150. The risk free rate is 3%. Assume that FB follows a log-normal model with volatility 20%
. The spot price of Facebook (FB) is $150. The risk free rate is 3%. Assume that FB follows a log-normal model with volatility 20% and expected rate of return 10%. Consider a 1-year 150-180 bull spread on FB made of calls.
(a) What is the probability of having profit at expiration?
(b) What is the probability of having maximum profit at expiration?
(c) What is the probability of having at least 50% of maximum profit at expiration?
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Technical Analysis Of The Financial Markets
Authors: John J. Murphy
1st Edition
0735200661, 978-0735200661
