{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# hw4 - Introduction to derivatives Fall 2011 BUSI 588...

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

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 one-year 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 Black-Scholes 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 one-year 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 Black-Scholes assumptions held. Suppose you hold a long position in thirty call options with a strike of \$100 and ten put options with a strike of \$90.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 2

hw4 - Introduction to derivatives Fall 2011 BUSI 588...

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

View Full Document
Ask a homework question - tutors are online