Repricing trigger that maximizes the initial value of option

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Reference no: EM131178999

A company compensates executives with 10-year Euaropean call options which is granted at the money. If there is a significant drop in the share price, the company's board will reset the strike price of the options to equal the new share price. Then , the maturity of the repriced option will equal the remaining maturity of the original option. Suppose volatility= 30%, r= 6%, dividends = 0% and the original share price is $100. Calculate the repricing trigger that maximizes the initial value of the option (please show the formulas that you use)

Reference no: EM131178999

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Repricing trigger that maximizes the initial value of option : A company compensates executives with 10-year Euaropean call options which is granted at the money. If there is a significant drop in the share price, the company's board will reset the strike price of the options to equal the new share price. Calcul..

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