Tutorial13_Derivatives+with+solution - Tutorial 13: Option...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 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 Black-Scholes Model. 8. Use the Black-Scholes 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 2-step 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 T-bill 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. a) Compute the trading volume and open interest based on the above transactions from 1 August 2009 to 5 August 2009....
View Full Document

This note was uploaded on 06/01/2011 for the course FIN 3026W taught by Professor Drtoerien during the Summer '09 term at University of Cape Town.

Page1 / 6

Tutorial13_Derivatives+with+solution - Tutorial 13: Option...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online