None A bank has written a European call option on one stockand a European put option on another stock. For thefirst option, the stock price is 50, the strike price is 51,the volatility is 28% per annum, and the time to maturityis nine months. For the second option, the stock price is20, the strike price is 19, the volatility is 25% per annum,and the time to maturity is one year. Neither stock paysa dividend, the risk-free rate is 6% per annum, and thecorrelation between stock price returns is 0.4. Calculatea 10-day 99% VaR by using Monte-Carlo simulations inexcel. show all excel steps and functions!!

To calculate the 10-day 99% VaR using Monte-Carlo simulations in Excel, we need to follow these…

Answered: A bank has written a European call…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A company’s stock currently sells for $81.16. A one-year European put option on that stock with strike price of $85 sells for $16.24, and the risk free interest rate is 1.6%. The market expects the company to pay dividends during that period, and the market consensus is that present value of those dividends is $5.26. The price of a one-year European call option on that stock with strike price of $85 is $_________. (Note i: answer must be accurate to the nearest cent). (Note ii. Use annual compounding NOT exponential compounding for the purpose of this question).
The price of a European call option on a non-dividend-paying stock with a strike price of $48.25 is $4.75. The stock price is $51.05, the continuously compounded risk-free rate (all maturities) is 6.45% and the time to maturity is 6 months. What is the price of a 6 months European put option on the stock with a strike price of $48.25? Answer with three decimal digits accuracy.
The price of a European call option on a non-dividend-paying stock with a strike price of $14.50 is $1.55. The underlying stock's price is $14.00, the continuously compounded risk-free rate (all maturities) is 6.5% and the time to maturity is nine months. What is the price of a one-year European put option on the stock with a strike price of $13? $1.42 $1.36 $2.09 $1.55
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. a) What is the price of the option if it is a European put?
Suppose a one-year European put option on a stock has an exercise price of $30 and oneyear European call option on the same stock has the same exercise price of $30. The call is worth 3$ and the put is worth 2$. If the one-year interest rate is 1.5%, what is the price of the underlying stock, assuming no arbitrage opportunity?
The price of a non-dividend-paying stock is $50 and the price of a 4-month European call option on the stock with a strike price of $50 is $3. The risk-free rate is 4% per annum. The price of the corresponding 4-month European put option with same strike price is $2. Establish which of the following options is true. O I. None of the above. O II. There are arbitrage opportunities because the put-call parity relation does not hold. The arbitrage opportunity is given by selling short the put option and the stock and buying the call option. The proceeds of this strategy are invested at the risk-free rate until the expiration date. O II There are no arbitrage opportunities as the put-call parity relation holds. O IV. There are arbitrage opportunities because the put-call parity relation does not hold. The arbitrage opportunity is given by selling short the call option and borrowing money from the bank at the risk-free rate to buy the stock and put option.
The stock price of Amazon is $50. The price of a 4-month European call option and a European put option on the stock with a strike price of $50 is $3. The stock pays $0.5 in dividends in one month and $0.75 in three months. The risk-free interest rate is flat at 4% per annum. Determine which of the following statements is true. O 1. The put-call parity relationship holds so there are no arbitrage opportunities. O II. There are arbitrage opportunities given by sellig short the call option and borrowing $50 at the risk-free rate until maturity to buy the stock and the put option. O II. There are arbitrage opportunities given by sellig short the call option and borrowing $48.7591 at the risk-free rate until maturity to buy the stock and the put option. Note that 48.7591=50 - D, with D the present value of all dividend payments. O IV. There are arbitrage opportunities given by sellig short the stock and put option and buying the call option. The proceeds of this strategy, given by $50, are…
The stock price of Amazon is $50. The price of a 4-month European call option and a European put option on the stock with a strike price of $50 is $3. The stock pays $0.5 in dividends in one month and $0.75 in three months. The risk-free interest rate is flat at 4% per annum. Determine which of the following statements is true. O I. The put-call parity relationship holds so there are no arbitrage opportunities. O II. There are arbitrage opportunities given by sellig short the call option and borrowing $50 at the risk-free rate until maturity to buy the stock and the put option. O III. There are arbitrage opportunities given by sellig short the call option and borrowing $48.7591 at the risk-free rate until maturity to buy the stock and the put option. Note that 48.7591=50 - D, with D the present value of all dividend payments. O IV. There are arbitrage opportunities given by sellig short the stock and put option and buying the call option. The proceeds of this strategy, given by $50,…
A 6-month European call option on a dividend-paying stock is cur- rently selling for $1.75. The stock price is $58.56, the strike price is $55, and a dividend of $1.20 is expected in 2 months and 5 months. The risk-free interest rate is 3% per annum for all maturities. (a) What opportunities are there for an arbitrageur? Detail your answer. (b) In this market a European put option with same strike price and maturity is also available for trading. Derive the no-arbitrage $3. price of the put option if the call option has a price of c = %3D (c) The European put option in the above section is trading at $3. What opportunities are there for an arbitrageur? Detail your answer.
What is the price of a European put option on a non- dividend-paying stock when the stock price is $69, the strike price is $70, the risk-free interest rate is 5% per annum, the volatility is 35% per annum, and the time to maturity is six months?
What is the price of a European put option on a non-dividend paying stock when thestock price is K69, the strike price is K70, the risk-free rate is 5% per annum, thevolatility is 35% per annum, and the time to maturity is 6 months?
Compute the price of a European call option on a non‐dividend‐paying stock with the strike price is $70 when the stock price is $73, the risk‐free interest rate is 10% pa, the volatility is 40% pa, and the time to maturity is 6 months?

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