Math 425
Solutions to Exam 3
April 23, 2001
1. (15) The formula V (s, t) = 10e-r(T -t) N (d2 ) gives the price of a cash or nothing option, which expires at time T , where the strike price is $40, and
Math 425
1.
Exam 3
April 25, 2002
(30) Assume a stock pays a continuous dividend at a yield of D y . That is, if during the time interval dt the stock has value S, then the amount of the dividend is D
Math 425
Exam 2 Solutions
March 26, 2002
1. (20) Let C denote the price of an American call option on a share of non-dividend paying stock.
Let X denote the strike price, er the annual interest, and t
Math 425
Solutions Exam 2,
March 1, 2012
1. (30) Let S0 = 100, r = 0.02, t = one week , u = 1.2, and d = 0.98.
(a) Find the value of a call with strike price 99 that expires in two weeks.
(b) Find the
Math 425 - 500
Solutions Exam 2
March , 2013
1. (50) The table below gives end-of-week stock prices. Assume the Geometric Brownian Motion model of stock prices for this problem, and that the annual ri
Math 425
1.
Solutions Exam 2
April 27, 2006
(50) The table below represents the possible prices of a share of stock, and the possible values of an
option whose value at t 1 depends on the stock price
Math 425
Solutions Exam 2
March 22, 2001
1. (15) The put call parity formula relates the prices of a European call to a European put option on the same stock with each option having the same strike pr
Math 425
Solutions to Exam 1
February 14, 2002
1. (30) Suppose that M-Corp stock is currently selling for $20 a share. That, Su = 22,
Sd = 19, and er = 1.01. A broker decides to oer a European call op
Math 425 - 500
Solutions Exam 1
February 19, 2013
1. (30) Let X denote the strike price of a forward contract, which expires at time T . If the cost
of the asset is S0 , and the risk free continuously
Math 425
1.
Solutions Exam 1
March 9, 2006
(30) Let F represent the forward price of a commodity at time n. Suppose 100r% is the interest rate per time period. Let S 0 represent the price of the commo
Math 425
Solutions Exam 1
Feb. 9, 2012
1. (20) You buy one put with a strike price of $50 and sell another put with a strike price of
$45. Both puts have the same expiration date. Graph the value of t
Math 425
Solutions Exam 3,
April 26, 2012
1. (25) Use Itos lemma to show that the geometric Brownian motion model of stock prices,
St = S0 e(
2 /2)t
eBt satises the equation
dS = Sdt + SdBt .
Itos lem