Tutorial 13:
Option Valuation and Futures (Introduction)
7.
Provide a detailed discussion on the six factors that influence the premiums of European call and
put options in the BlackScholes Model.
8.
Use the BlackScholes formula to find the value of a call option of the following stock:
Time to maturity
= 6 months
Standard deviation
= 50% per
year
Exercise price = 50
Stock price
= 50
Interest rate
= 10% p.a.
9.
Recalculate the value of the option in question 8, successively substituting one of the
changes below while keeping the other parameters as in question 4:
a.
Time to maturity
= 3 months
b.
Standard deviation
= 25% per
year
c.
Exercise price
= 55
d.
Stock price
= 55
e.
Interest rate
= 15% p.a.
Consider each scenario independently.
Confirm that the option value changes in
accordance with theoretical expectations.
10.
Today is 1 September 2008. Use 2step approach based on the binomial option pricing model to
determine the fair values of the call option (X = R420) and Put option (X = R380) on a SASOL
shares.
The share price of SASOL is currently R400, and is expected to move up by 15%, or down by
10% every six months. The current South African S/T Tbill rate is 8% p.a.
11
On 1 August 2009, A buys 2 futures contracts and B sells 2 futures contracts;
On 2 August 2009, C buys 3 futures contracts and D sells 3 futures contracts;
On 3 August 2009, A sells 2 futures contracts and D buys 2 futures contracts;
On 4 August 2009, E buys 4 futures contracts, C sells 1 futures contract, and A sells 3 futures contracts;
On 5 August 2009, A buys 3 futures contracts, B buys 2 futures contract, and C sells 5 futures contracts.
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 Summer '09
 DrToerien
 Derivatives, Derivative, Options, Valuation, futures contracts, Sasol

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