70.2K

Verified Solution

Link Copied!

Intro Consider the following information about a European call option: A B D 1 Risk-free rate 0.06 EAR 2 Option type Option type Strike price European Call 200 Years to exp. 0.4 6 No. of periods 1 Period length 0.4 years =B5/B6 | 8 201 9 Stock price now 10 Sigma 11 Up 0.53 0.398 =EXP(B$10*B$7^0.5)-1 =EXP(-B$10*B$7^0.5)-1 12 Down -0.285 Part 1 18 | Attempt 1/3 for 10 pts. What will be the stock price if the stock price goes down? 0+ decimals Submit Part 2 8 Attempt 1/3 for 10 pts. How many shares of stock do you need to buy to create the replicating portfolio (enter the number of shares sold short as a negative number)? 2+ decimals Submit 18 Attempt 1/3 for 10 pts. Part 3 How much money do you need to invest to create a portfolio that replicates the payoff from one call option (enter any amount borrowed as a negative number)? 0+ decimals Submit 18 Attempt 1/3 for 10 pts. Part 4 What should be the price (premium) of the call option? 0+ decimals Submit Intro Consider the following information about a European call option: A B D 1 Risk-free rate 0.06 EAR 2 Option type Option type Strike price European Call 200 Years to exp. 0.4 6 No. of periods 1 Period length 0.4 years =B5/B6 | 8 201 9 Stock price now 10 Sigma 11 Up 0.53 0.398 =EXP(B$10*B$7^0.5)-1 =EXP(-B$10*B$7^0.5)-1 12 Down -0.285 Part 1 18 | Attempt 1/3 for 10 pts. What will be the stock price if the stock price goes down? 0+ decimals Submit Part 2 8 Attempt 1/3 for 10 pts. How many shares of stock do you need to buy to create the replicating portfolio (enter the number of shares sold short as a negative number)? 2+ decimals Submit 18 Attempt 1/3 for 10 pts. Part 3 How much money do you need to invest to create a portfolio that replicates the payoff from one call option (enter any amount borrowed as a negative number)? 0+ decimals Submit 18 Attempt 1/3 for 10 pts. Part 4 What should be the price (premium) of the call option? 0+ decimals Submit

Answer & Explanation Solved by verified expert

See Answer