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Using Black-Scholes option pricing formula, compute the value of a Call Option on AAPL stock with a June 16, 2017 expiration and a strike price of $150 (spot 147.06) (rfr .73). Assume the volatility of AAPL to be equal to the VIX value of the day you are working on this problem (vix closed at 10.65). State your date and VIX value as part of your work. Now assume that the same option has an implied volatility of .20 and recompute the option value using Black-Scholes. Explain the differences in value that you find. (To completely answer this question you must use Black-Scholes TWICE - show all work)
The rfr is the risk free rate. That is the rate of return we are supposed to use. The .73 I have included is the 1 month rfr and should suffice for this problem.
I am unclear however, on how to more appropriately use the VIX value as a stand in for the volatility. I did supply the VIX value I was able to find but am not sure if more needs to be done in order for the value to be useful.
LIBOR rates will not be needed for this class.
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