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Consider a European option on a non-dividend-paying stock when the stock price is $30, the exercise...

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Finance

Consider a European option on a non-dividend-paying stock whenthe stock price is $30, the exercise price is $29, continuouslycompounded risk-free interest rate is 5%, volatility is 25% perannum, and time to maturity is 4 months (assume 4 months equals 120days).

a. Find values of Delta for the two options.

b. Using just delta, what should be the change in the price ofthe call option if the price of the underlying stock increases by$0.04?

d. Find values of Theta for the two options.

e. What is the effect of theta on a long call option?

Answer & Explanation Solved by verified expert
4.3 Ratings (703 Votes)
GivenS Price of the underlying 30K Option strike price 29r Risk free Interest Rate 5 Volatility 25t time to expirymaturity 120    See Answer
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