Pricing Exotic Options. A given stock is currently priced at$100. Historically, its annual return has been 12 percent with astandard deviation of 15 percent. Build a spreadsheet simula-tion model for the stock price, using the option pricing modeldescribed in the text. Build the model to simulate the stockprice over 126 days. Assume that the risk-free rate of return is6 percent.a. A particular European call option gives the owner the rightto purchase this stock after six months at a strike price of $105.What is the price of the option?b. Create a graph of the option price as a function of thestrike price, for strike prices from $100 to $110 in incrementsof $1.c. A particular European put option gives the owner the rightto sell this stock after six months at a strike price of $95. What isthe price of the put?d. A lookback call option on this stock ha
Pricing Exotic Options. A given stock is currently priced at$100. Historically, its annual return has been 12 percent with astandard deviation of 15 percent. Build a spreadsheet simula-tion model for the stock price, using the option pricing modeldescribed in the text. Build the model to simulate the stockprice over 126 days. Assume that the risk-free rate of return is6 percent.a. A particular European call option gives the owner the rightto purchase this stock after six months at a strike price of $105.What is the price of the option?b. Create a graph of the option price as a
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