case09 - Introduction to derivatives Fall 2011 BUSI 588...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Introduction to derivatives, Fall 2011 BUSI 588, Case 9 Galitzin - pricing American options Please prepare for class discussion on Monday, 9/26. You were having a great summer intershipt at Golden Sacks until you received the call from Galitzin. Prince Galitzin, one of the best clients at Golden Sacks, had a rather unusual request: he would like to purchase a put option on the S&P521, with a strike of $1300 and with a four year maturity! Moreover, he was asking for the option to be American - just so one could not even use the Black- Scholes model to price it. Galitzin was talking about buying close to $5m worth of options, so one had to make sure the pricing was good - this deal should not go to the competition, neither should it be mispriced! Assume that the current value of the S&P 521 is 1311.01, and that the term structure is flat at 5%. You also can assume the dividend yield on the S&P 521 over the next five years will be around 2%.
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern