Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Using the information in the first picture, can you please me how to do Question 2 in the second picture. that o = TABLE 13.4

image text in transcribed
image text in transcribed
Using the information in the first picture, can you please me how to do Question 2 in the second picture.
that o = TABLE 13.4 Predicted option price over a period of 1 day, assuming stock price move of $0.75, using equation (13.6). Assumes 0.3.r=0.08, T - t=91 days, and 8 =0, and the initial stock price is $40. Option Price 1 Day Later (h=1 day) Starting Price EA er oh Predicted Actual Site = $40.75 $2.7804 0.4368 0.0183 -0.0173 $3.2182 $3.2176 Sith = $39.25 $2.7804 -0.4368 0.0183 -0.0173 $2.3446 $2.3452 Compute the call price via C(S:+,, T e h) = C(S, 1 t) + A(S, T t) + 2T(S., T t) + h(,T t). Question 2. (25 points) Under the same setting as the previous problem, we have the following table TABLE 13.5 Predicted effect, using equation (13.7), of different sized stock price moves on the profit of a delta-hedged market- maker. Absolute Value of Price Move, lel 0.0000 0.2500 0.5000 0.6281 0.7500 1.0000 1.5000 -er -oh-rh[AS, - C(s)] 1.283 1.080 0.470 0.000 -0.546 -1.970 -6.036 Now write your codes to produce the second column give the following lel's. All results have to keep FOUR digits after the decimal period. Solution lel -er-eh- rh[AS, -C(S.)] 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 that o = TABLE 13.4 Predicted option price over a period of 1 day, assuming stock price move of $0.75, using equation (13.6). Assumes 0.3.r=0.08, T - t=91 days, and 8 =0, and the initial stock price is $40. Option Price 1 Day Later (h=1 day) Starting Price EA er oh Predicted Actual Site = $40.75 $2.7804 0.4368 0.0183 -0.0173 $3.2182 $3.2176 Sith = $39.25 $2.7804 -0.4368 0.0183 -0.0173 $2.3446 $2.3452 Compute the call price via C(S:+,, T e h) = C(S, 1 t) + A(S, T t) + 2T(S., T t) + h(,T t). Question 2. (25 points) Under the same setting as the previous problem, we have the following table TABLE 13.5 Predicted effect, using equation (13.7), of different sized stock price moves on the profit of a delta-hedged market- maker. Absolute Value of Price Move, lel 0.0000 0.2500 0.5000 0.6281 0.7500 1.0000 1.5000 -er -oh-rh[AS, - C(s)] 1.283 1.080 0.470 0.000 -0.546 -1.970 -6.036 Now write your codes to produce the second column give the following lel's. All results have to keep FOUR digits after the decimal period. Solution lel -er-eh- rh[AS, -C(S.)] 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Agricultural Finance

Authors: Charles Moss

1st Edition

0415599075, 978-0415599078

More Books

Students also viewed these Finance questions

Question

What lessons in OD contracting does this case represent?

Answered: 1 week ago

Question

Does the code suggest how long data is kept and who has access?

Answered: 1 week ago