Ch%2016_p2 - Figure 14.32 Pricing a Call Option 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Ch%2016_p2 - Figure 14.32 Pricing a Call Option 1 2 3 4 5 6...

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Figure 14.32 Pricing a Call Option Page 1 Pricing a Put Option Problem 2 Chapter 16 Current Stock Price $100.00 Exercise Price #ADDIN? Mean annual growth rate - Annual volatility 20% Risk-free rate 12% Option Duration 1 Stock Price in one year #ADDIN? Option cash flows at termination #ADDIN? Discounted value of option #ADDIN? cash flows at termination Summary Information Workbook Name Ch 16_p2.xls Number of Simulations 3 Number of Iterations 400 Number of Inputs 2 Number of Outputs 1 Sampling Type Latin Hypercube Simulation Start Time 4/6/2010 10:45 Simulation Stop Time 4/6/2010 10:45 Simulation Duration 00:00:03 Random Seed 1854587254 Output Statistics Exer Price Name Cell Sim Minimum Mean Maximum x1 p1 x2 p2 $90.00 Discounted value of option D12 1 $- $1.15 $25.30 $- 5% $9.00 95% $100.00 Discounted value of option D12 2 $- $3.16 $34.17 $- 5% $17.87 95% $110.00 Discounted value of option D12 3 $- $6.70 $43.04 $- 5% $26.74 95% We see that an increase in the exercise price increases the value of the put because the put is more likely to be exercised.

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