Topic_15_E1 - Topic 15 Exercise 1 Options Valuation...

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Topic 15 Exercise 1 Options Valuation Black-Scholes Option Pricing Model The Black-Scholes Option Pricing Model is used extensively in the industry. The model can be used to find the price of options and to analyze the sensitivity of option prices to changes in the level of the factors that influence the options price. Sensitivity analysis can reinforce your understanding of the variables that drive options pricing. Peter Hoadley offers an outstanding website for analyzing options . The site offers additional pricing applications and the ability to analyze multiple options positions. For this exercise, access the Black-Scholes Option Pricing Model for a stock that is not currently paying dividends. The stock options that you want to price have the following characteristics: Type of Option Strike Price Days to Maturity Call $90 90 Call $90 30 Call $80 90 The stock is currently trading at a price of $85 per share. You have estimated the volatility on the stock to be 40% and the current risk-free rate is 4%. 1. What would be the price for each of these options using the Black-Scholes Model?
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Topic_15_E1 - Topic 15 Exercise 1 Options Valuation...

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