Purchase Solution

Call and Put Prices

Not what you're looking for?

Ask Custom Question

AD 13: The Dow Jones Industrial Average on December 22, 2009 was 10,464 and the price of the March 100 call was $5.00. Assume the risk-free rate is 3.2%, the dividend yield is 2% and the option expires on February 20, 2010. (Note that the options are on the Dow Jones Index divided by 100.)

Q1: Use Derivagem to calculate the implied volatility of the call option.

Q2: Use put-call parity to estimate the no arbitrage price of a March 100 put.
Q3: Given the price determined in Q2, use Derivagem to calculate the implied volatility of the put option.
Q4: What do you conclude about put-call parity and implied volatility for European options?

Attachments
Purchase this Solution

Solution Summary

Uses software (Derivagem) to calculate option prices and implied volatility.

Purchase this Solution


Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.