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Unformatted text preview: Introduction to derivatives, Fall 2011 BUSI 588, Homework 4 Homework 4 Due at the beginning of class, September 28th, 2011. 1. (*) You know the current value of a call option on the S&P500 with a strike price of $1350 and oneyear maturity is $76. The S&P500 is currently trading for $1313.50, and it is expected to pay a 2% dividend yield over the next few years. The current term structure is flat at 5%. (a) What is the implied volatility of the call option? (b) Using the BlackScholes model, what would you estimate the value of a put with a strike of $1300 on the S&P500 to be? 2. (*) Consider the following prices of a set of European options with oneyear maturity. Strike 90 100 110 Call price 18.07 12.28 7.98 Put price 3.78 7.51 12.74 You know the current value of the underlying asset is $100, and that the term structure is flat at 5%. The above options are all priced as if the underlying asset had a 25% annual volatility, and all of the BlackScholes assumptions held....
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This note was uploaded on 11/25/2011 for the course BUSI 588 taught by Professor Staff during the Fall '10 term at UNC.
 Fall '10
 Staff
 Derivatives

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