A put and call on the same underlying share each have strike price 25 and expiry date 2 years. Which portfolio will give a payoff-IS(2)-25), where S(2) is the price of the stock in 2 years. Select one: O a. going long one put and long one call O b. going short one put and long one call Oc. going long one put and short one call Od. going short one put and short one call

Calculate the risk neutral probability

You buy a share of stock, write a 1-year call option with X = $55, and buy a 1-year put option with X = $55. Your net outlay to establish the entire portfolio is $54. The stock pays no dividends. a. What is the payoff of your portfolio? Payoff b. What must be the risk-free interest rate? (Round your answer to 2 decimal places.) Risk-free rate %

Nikul

Consider a certain butterfly spread on American International Group stock (AIG): this is a portfolio that is long one call at $50, long one call at $70, and short 2 calls at $60. Assume expiration of all options s at the same timet=T. (@) Graph the payoff of this portfolio at expiration T as a function of the stock price ST of AIG. (b) If today the calls cost $13.10, $5.00, and $1.00 for the strikes at 50, 60, and 70, respectively, what will be the profit or loss (PnL) from buying this spread if the stock turns out to be trading at S5 at time T2 at $35? Assume the risk-free rate is 0%,

he stock price of Copious Corp. is currently $31. The stock price 2 year(s) from now will be either $34 or $ 27. The annual risk - free rate is 7.2%. Using the binomial model, what is the value of a call option with an exercise price of $31 and an expiration date 2 year(s) from now?

Assume that you hold a call option on stock A. The call has a strike price of 50 and expires in 6 months. Stock A pays no dividends. 1. What is the payoff from the call if stock A is trading at 57 in 6 months? 2. What is the payoff from the call if stock A is trading at 45 in 6 months? 3. Draw a payoff diagram that shows the payoff of the call as a function of the underlying stock price.

Let S = $100, K = $95, \sigma = 30%, r = 8%, T = 1, and \delta = 0. For simplicity, let u = 1.3, d = 0.8 and n = 2 (that is, 2 periods). When constructing the binomial tree for the European call option, what is A (Stock Share Purchased in the replicating portfolio) at the first node (Time 0)? Question 11 options: 0.1789 0.3886 1.0000 0.2550 0.6912

Assume that an investor holds the following portfolio: short stock bought at a price 90$, long one 3- month maturity call option on the same stock with an exercise price of $88. a) Show the payoff structure of this portfolio at option expiration both numerically and graphically. b) Calculate the profit/loss on this position if stocks are selling at $80 on the option maturity date. Calculate the profit/loss on the position if the stocks are selling at $110. Call option premium is $5, while put option premium is $3. Ignore the transaction costs. c) Explain what kind of "bet" the investor is making. What must the investor in such a portfolio believe about the stock price to justify this position?

Assume that you have shorted a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months' time. a. If the stock is trading at $55 in three months, what will you owe? b. If the stock is trading at $35 in three months, what will you owe? c. Draw a payoff diagram showing the amount you owe at expiration as a function of the stock price at expiration. a. If the stock is trading at $55 in three months, what will you owe? If the stock is trading at $55 in three months, you will owe $ (Round to the nearest dollar.)