Question
This question is based on the following information on the Black-Scholes (BS) model. ???? index level = 1890 ???? exercise price = 1988 ???? time
This question is based on the following information on the Black-Scholes (BS) model.
???? index level = 1890
???? exercise price = 1988
???? time to option maturity = 0.49 years
???? continuously compounded risk-free rate = 2%
???? estimated continuously-compounded dividend yield on the index = 6% per year
???? estimated index return standard deviation = 30%
If the market call price is $1 lower than the BS price, assume that dividend yield is estimated correctly, what can we conclude about the estimated volatility?
A.It's too high.
B.It's too low.
C.It's correctly estimated.
This question is based on the following information on the Black-Scholes (BS) model.
???? index level = 1890
???? exercise price = 1988
???? time to option maturity = 0.49 years
???? continuously compounded risk-free rate = 2%
???? estimated continuously-compounded dividend yield on the index = 6% per year
???? estimated index return standard deviation = 30%
What is the risk neutral probability that this call option finishes in-the-money?
A.0.3300.
B.0.4090.
C.0.6700.
This question is based on the following information on the Black-Scholes (BS) model.
???? index level = 1890
???? exercise price = 1988
???? time to option maturity = 0.49 years
???? continuously compounded risk-free rate = 2%
???? estimated continuously-compounded dividend yield on the index = 6% per year
???? estimated index return standard deviation = 30%
What is the BS call hedge ratio?
A.0.4090.
B.0.5910.
C.0.3300.
This question is based on the following information on the Black-Scholes (BS) model.
???? index level = 1890
???? exercise price = 1988
???? time to option maturity = 0.49 years
???? continuously compounded risk-free rate = 2%
???? estimated continuously-compounded dividend yield on the index = 6% per year
???? estimated index return standard deviation = 30%
Based on the above input, what is the European call price using the BS model?
A.$99.97.
B.$100.97
C.$101.97
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