Use the Black-Scholes pricing formula to calculate the price today of a European call option with strike £518.23, maturing in 12 months, if the spot price of the underlying is £534.35, its volatility is 25.13% and the risk-free rate is 4%. Give your answer correct to 2 decimal places

Stock Z is currently selling for $120. You believe that, one year from now, Stock Z will sell for either $155 (up-state) or $85 (down-state). The yield on a 1-year risk-free zero coupon bond is currently 4%. You have a European put option with a 1-year expiration date and an exercise price of $115. What is this option's delta (Δ) ?

Consider an American put option with time to expiry 15 months, and a strike of 74. The current price of the underlying is 71. Divide the time to expiry into three 5-months intervals. Assume that in each 5-months interval, the price can either rise by 5, or fall by 5, with unknown probability. The risk-free (continuously compounding) rate is 0.042.  Using a binomial tree, identify the circumstances under which early exercise would be rational for the holder of this option. Draw the binomial tree and show the necessary calculation and briefly explain the answer.

Consider an American Put option with time to expiry of 5 months and a strike price of 82. The current price of the underlying stock is 80. Divide the time to expiry into five 1-month intervals. In each interval, the stock price can either rise by 6, or fall by 6, with unknown probability. The risk-free rate is 4.2% per annum, continuously compounded.  What is the value of the option. Please provide necessary calculations.

The stock price is currently $130. Over each of the next two 2-month periods, it is expected to go up by 3% or down by 4%. The risk - free interest rate is 1.5% per annum with continuous compounding. What is the value of a 4- month European put option with a strike price of $120? Use a binomial tree model, and round the result to three decimal places. 1. $1.019 2. $2.602 3. S 0.029 4. $0.0 5. $6.645

Use Two-State Binomial Option (European) Pricing Model. Suppose you bought a stock today for $38.00. The stock price can either go up by a factor of 1.30 or down by a factor of 0.70 with equal probability in 0.50 years (or 180 days). Suppose the annual risk-free rate is 3.50% and the option exercise price is 35.00. How much should be the Call Option Value that expires in 0.50 years (or 180 days)?Enter your answer in the following format: 1.23Hint: The answer is between 6.74 and 9.38

You observe the price of a European put option that expires in nine months and has a strike price of$45 is $3. The underlying stock price is $49.50. The term structure is flat, with all risk-free interestrates being 8%.a. What is the price of a European call option that expires in nine months and has a strike priceof $45? b. You observe next that the price of the call option (in part (a)) in the market is $9.59. Statewhy an arbitrage opportunity exists and explain how you would take advantage of thisopportunity.  (Hint: answer should include an outline general strategy, net cost ofstrategy at initiation and net profit at expiration using the numbers in the question)

2. The price of a European call that expires in six months and has a strike price of $30 is $2. The underlying stock price is $29, and a dividend of $0.50 is expected in two months and again in five months. The term structure is flat, with all risk-free interest rates being 10%. Calculate the price of a European put option that expires in six months and has a strike price of $30. PY of Dividends Dividend 1* e^(-12) + Dividend 2 * e^(-12)

Consider a European call option on a stock with current price $100 and volatility 25%. The stock pays a $1 dividend in 1 month. Assume that the strike price is $100 and the time to expiration is 3 months. The risk free rate is 5%. Calculate the price of the the call option.

If you were to write a call option on XYZ (with a strike price of $100) AND also write a put option on XYZ (with a strike price of $100), each within six months maturity, what type of bet are you making? 1.XYZ will go up 2.XYZ will go down 3. Volatility of XYZ will increase 4. Volatility of XYZ will decrease