1. Consider a 4 month European put on a stock with no dividend the follow- ing parameters: S(0) = 305, K = 300, r = 0.08, o = 0.25 (a) Compute the option's vega (b) If o increases by 0.01, what is the approximate increase in the value of the option?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter5: Financial Options
Section: Chapter Questions
Problem 5P
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1. Consider a 4 month European put on a stock with no dividend the follow-
ing parameters:
S(0) = 305, K
(a) Compute the option's vega
(b) If o increases by 0.01, what is the approximate increase in the value
of the option?
300, r = 0.08, o = 0.25
Transcribed Image Text:1. Consider a 4 month European put on a stock with no dividend the follow- ing parameters: S(0) = 305, K (a) Compute the option's vega (b) If o increases by 0.01, what is the approximate increase in the value of the option? 300, r = 0.08, o = 0.25
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