By how much does the call price change

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Question: Repeat the analysis of Problem assuming that the volatility of the stock's return is 40%. Intuitively, would you expect this to cause the call price to rise or fall? By how much does the call price change?

Problem: HSBC stock trades at £475.8 (Pound sterling) per share. A call option on the stock has a strike price of £490 and an expiration date of six months. The volatility of the stock's return has been 26% in the last year, and the risk-free rate is 1.5%. Calculate the value of the option using the Black and Scholes formula.

Reference no: EM131627325

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