Title BP plc shares are currently selling for £4.29 per share. A put option with an exercise price of... Description BP plc shares are currently selling for £4.29 per share. A put option with an exercise price of £4.40 sells for £0.25 and expires in 3 months. If the risk-free rate of interest is 2.6 per cent per year, compounded continuously, what is the price of a call option with the same exercise price?

1. A European call option and put option on a stock both have a strike price of $20 and an expiration date in three months. Both sell for $3. The risk-free interest rate is 10% per annum, the current stock price is $19 and a $1 dividend is expected in one month. Identify the arbitrage opportunity to the trader.

Consider a forward contract which allows you to buy/sell a non-dividend paying stock in three months. Assume the current stock price is $99.41 and the three-month risk free interest is 5.4 percent per year. What should be the forward price? Keep your answer to two decimal places.

The current stock price of KLMCO iNC is $111.00. You expect the stock price a year from now to be either $128.00 or $92.00 with equal probabilities . The interest rate at which investors can borrow is 11%. using the binomial opm, what should be the price of a put option with an exercise price of $120.00 an expiration date one year from now

TreeOlivia's stock price is $180 and could halve or double in each six-month period. The interest rate is 12% a year. What is the value of a six-month call option on TreeOlivia with an exercise price of $120? What is the option delta for the six-month call with an exercise of $120? The payoffs of the six-month call option can be replicated by buying shares of stock and borrowing. What amount should be invested in stock and what amount must be borrowed? Assume the exercise price is $120. What is the value of the one-year call option on TreeOlivia with an exercise of $150? (Hint: use the two-step binominal tree) What is the value of the one-year put option on TreeOlivia with an exercise of $150?

Calculate the price of a three-month European put option on a non-dividend-paying stock with a strike price of $50 when the current stock price is $50, the risk-free interest rate is 10% per annum, and the volatility is 30% per annum.

The current price of a non - dividend paying stock is $617 and the annual standard deviation of the rate of return on the stock is 32%. A European call option on the stock expires in 0.5 years. Its strike price is $630. The risk - free rate is 2% (continuously compounded) What should be the price (premium) of the call option?

You observe that the settlement price of a one-year futures contract for 1 share of a dividend paying stock is currently at $52. The current stock price is $50 and the risk-free interest rate is 10% p.a. (compounded annually). It is also known that the dividend yield on the stock is 4% p.a. (compounded annually). Set up a strategy to realize an arbitrage profit today and show the initial and terminal cash flows from each position taken in the strategy. Assume that investors can short-sell or buy the stock on margin and that they can borrow and lend at the risk-free rate. Thank you!

(a) The price of a European put on XYZ stock that matures in six months and has a strike price of £60 is £10. XYZ is currently priced at £65 per share, and is sure to pay a £10 dividend in three months. The continuously compounded risk-free rate is 8% per year for all maturities. What is the price of a European call on XYZ stock with the same maturity (six months) and strike (£60)? Show in detail how you would create an arbitrage if the call price were in fact £1 less than the theoretical price. (b) What can you conclude about the call price in part (a) if the stock cannot be sold short either in the spot nor in the forward markets?

A firm considers to invest in two zero-coupon bonds (X and Y) in order to cover for a selection of its future liabilities. These zero-coupon bonds will be redeemed in 6 years' and in 20 years' time, respectively. The given selection of its liabilities consist of £10 million due in 8 years' time and £6 million due in 15 years' time. Find the value of bond Y at a rate of interest of 8% per annum effective such that the first two conditions for Redington's theory of immunisation are satisfied (answer using formulas, no tables)