Assignment 3 - Assignment 3 Johnson Graduate School of...

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Assignment 3 Johnson Graduate School of Management Equity Derivatives and Related Products Due on October 5, 2010 Professor Mark Zurack Question 1 XYZ is trading at $100, a 6 month call option on XYZ struck at $90 is priced at $15 and has a delta of 0.6.  6 month  LIBOR is 3% per annum and XYZ has a 1% per annum dividend yield. a) What is the intrinsic value of the option? b) What is the time premium? c) What cost of money benefit does the investor receive when buying the option? d) How much income does she lose by purchasing the option rather than the stock? e) What is the insurance cost of this option? f) What is the forward price of the stock six months from now? g) Where should the 6 month put option on XYZ struck at $90 trade? h) If the volatility used to value the option is 28.28%/year what is the 6 month expected volatility? i)
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Assignment 3 - Assignment 3 Johnson Graduate School of...

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