A put option with an exercise price of $45 is currently selling for $5. The delta for the put is -0.4, and the stock is currently selling for $50. What is the elasticity of the put?

H2. Using the Black-Scholes model (BSOPM), compute the standard deviation that is implied by the following call option data as: the time to the option's maturity is 0.25 years, the price of the underlying option asset is RM30, the continuously compounded risk-free interest rate is 0.12. the exercise or striking price is RM30, and the cost or premium of the call is RM1.90.

Question 1. A call option with a strike price of $50 costs $2. A put option with a strike price of $45 costs $3. Explain how a strangle can be created from these two options. What is the pattern of profits from the strangle?

This section asks you to calculate prices for various options. In all cases, consider a rate r = 7.97% per year. Estimate the volatility of returns using the estimator: 1 n-1 σ²≈ T-t i=0 Si+1 log. Sti 2 The term of each option will be T = 182/360 (half a year). Determine a reasonable strike K, which is at similar levels to the price series you have downloaded. An option is a derivative instrument that gives its holder the right to buy or sell an underlying asset at a pre-agreed price K at a future date T. If this right can only be exercised in time T, we say that the option is of the European type. If it can be exercised at T or at any time prior to T, then we say that the option is American. Likewise, if the option grants the right to buy, we say that the option is Call type, if it grants the right to sell then the option is Puttype. These types of options are the simplest and are known as European vanilla options. In this case, if T is the expiration date of the contract, and St is…

Assume an interest rate of zero. A Call option and a Put option with the same exercise price, X = 100p are priced at 9p for the Call and 4p for the Put. What is the price of the synthetic share?

Assume an interest rate of zero. A Call option and a Put option with the same exercise price, X = 100p are priced at 9p for the Call and 4p for the Put.The actual share is priced at S = 110p. Explain how you would exploit thearbitrage opportunity this presents. You must state which securities you would buy or sell. Show that the net cash position is 5p.