Question
You are a fixed income fund manager and you are considering buying options on interest rate futures. The current interest rate is 6%, the interest
You are a fixed income fund manager and you are considering buying options on interest rate futures. The current interest rate is 6%, the interest rate futures price is 94.05, and the exercise price is 94.50. The volatility is 18% and the option has a life of 80 days.
(a) Calculate the price of the call option on the interest rate future.
(b) Calculate the price of the put option on the interest rate future.
Step by Step Solution
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
