Question
You have a 1-year call option for which the underlying asset is one barrel of oil. The exercise price is $45 per barrel. Suppose that
You have a 1-year call option for which the underlying asset is one barrel of oil. The exercise price is $45 per barrel. Suppose that investors believe that the annual standard deviation of oil prices is 30%. Annual risk free rate is 5% and the current oil price per barrel is $40. What is the call option price?
| a. | $3.66 | |
| b. | $9.17 | |
| c. | $2.08 | |
| d. | $5.69 | |
| e. | $12.00 |
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Global Banking
Authors: Roy C Smith, Ingo Walter, Gayle DeLong
3rd Edition
0195335937, 9780195335934
