What is the approximate fair value of a European style 150 call option on a physical asset given the following information: Underlying price 200p Interest rate 10% Days to expiry 180 No dividends/coupons payable Put price 16p Volatility 40% A) 16p B) 150p C) 73p D) 75p
You need for example black and scholes do this… Thats no level I question
cfaisok Wrote: ------------------------------------------------------- > You need for example black and scholes do this… > > Thats no level I question No man…simple put-call parity 
strangedays Wrote: ------------------------------------------------------- > What is the approximate fair value of a European > style 150 call option on a physical asset given > the following information: > Underlying price 200p > Interest rate 10% > Days to expiry 180 > No dividends/coupons payable > Put price 16p > Volatility 40% > > A) 16p > B) 150p > C) 73p > D) 75p you can do it on an HP12c but I forgot how exactly. Not on level 1
daj224 Wrote: ------------------------------------------------------- > strangedays Wrote: > -------------------------------------------------- > ----- > > What is the approximate fair value of a > European > > style 150 call option on a physical asset given > > the following information: > > Underlying price 200p > > Interest rate 10% > > Days to expiry 180 > > No dividends/coupons payable > > Put price 16p > > Volatility 40% > > > > A) 16p > > B) 150p > > C) 73p > > D) 75p > > > you can do it on an HP12c but I forgot how > exactly. Not on level 1 Simple level 1 question… lost one point in the exam
B…?
heha168 Wrote: ------------------------------------------------------- > B…? Nope try again…
strangedays Wrote: ------------------------------------------------------- > daj224 Wrote: > -------------------------------------------------- > ----- > > strangedays Wrote: > > > -------------------------------------------------- > > > ----- > > > What is the approximate fair value of a > > European > > > style 150 call option on a physical asset > given > > > the following information: > > > Underlying price 200p > > > Interest rate 10% > > > Days to expiry 180 > > > No dividends/coupons payable > > > Put price 16p > > > Volatility 40% > > > > > > A) 16p > > > B) 150p > > > C) 73p > > > D) 75p > > > > > > you can do it on an HP12c but I forgot how > > exactly. Not on level 1 > > > Simple level 1 question… lost one point in the > exam shi%
C: 73 (72.98) Put/Call Parity: C + X/(1+RFR)^T = S + P C + 150/(1.10)^.5 = 200 + 16
soxboys21 Wrote: ------------------------------------------------------- > C: 73 (72.98) > > Put/Call Parity: > C + X/(1+RFR)^T = S + P > > C + 150/(1.10)^.5 = 200 + 16 BINGO!
C- assuming the puts strike price is also 150
soxboys21 Wrote: ------------------------------------------------------- > C: 73 (72.98) > > Put/Call Parity: > C + X/(1+RFR)^T = S + P > > C + 150/(1.10)^.5 = 200 + 16 where does the .5 come from? 180/360? – why not 180/365???
daj224 Wrote: ------------------------------------------------------- > soxboys21 Wrote: > -------------------------------------------------- > ----- > > C: 73 (72.98) > > > > Put/Call Parity: > > C + X/(1+RFR)^T = S + P > > > > C + 150/(1.10)^.5 = 200 + 16 > > > where does the .5 come from? > > 180/360? – why not 180/365??? dude in put call parity, 360 or 365 is not a bit issue
180/365 gets you 72.887. So either way gets you close enough to choose C! I couldn’t remember if it was based on 365 or 360–it seems like every equation is different!