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Consider a 1-year European put on TSLA with a strike price of $400. TSLA spot...

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Finance

Consider a 1-year European put on TSLA with a strike price of $400. TSLA spot price is $320 and its volatility is 25%. TSLA is expected to pay no dividend. The risk-free rate is 5%.
a) Use Black-Scholes-Merton (BSM) model to price this put option. (2 marks)
b) What is the put delta? If the short position decides to delta-hedge, what would the net cash flow be? (2 marks)
c) Without using Black-Scholes-Merton (BSM) model, what are the 1-year 400-strike straddle price and its delta? (2 marks)
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Question 4 (6 marks) Consider a 1-year European put on TSLA with a strike price of $400. TSLA spot price is $320 and its volatility is 25%. TSLA is expected to pay no dividend. The risk-free rate is 5%. (a) Use Black-Scholes-Merton (BSM) model to price this put option. (2 marks) (b) What is the put delta? If the short position decides to delta-hedge, what would the net cash flow be? (2 marks) (c) Without using BSM model, what are the 1-year 400-strike straddle price and its delta

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