Find the delta of the call

Assignment Help Financial Management

Reference no: EM131176538

Assume XYZ stock is currently at S = $100. After one period, the price will move to one of the following two values: [uS and dS], where [u = 1.2; d = 0.9]. A $1.00 investment in the risk-free asset using continuous compounding will return $1.10 at the end of the period.

(a) Find the risk-neutral probabilities governing the movement of the stock price.

(b) For a strike price of 100 for call, find the delta of the call.

c) For a strike of 100 for put, find the delta of the put.

d) Compute the difference between the call delta and the put delta and explain the answer you Get.

Reference no: EM131176538

Questions Cloud

How many phones must be sold to achieve the breakeven point : U.S. Telephone Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10% (based on the unit sales price per phone). Fixed manufacturing costs total $1,030 per month, while fixed selling and administrativ..

How are financial intermediaries able to generate profits : What are recent challenges that financial institutions have faced given current economic conditions? Have they faced challenges? Has the financial system faced challenges? Explain. How are financial intermediaries able to generate profits?

What is the total interest paid over the life of the loan : If you had a 6 percent $200,000 mortgage 30 year fixed rate mortgage, how much would be your yearly payments. How long would it take for you to repay 40 percent of your mortgage? What is the total interest paid over the life of the loan?

Study as a student in the master of finance program : It is the end of your final year of study as a student in the Master of Finance program and you are trying to determine what you are going to do over the remaining 35 years of your working life. You are trying to decide whether you should remain at u..

Find the delta of the call : Assume XYZ stock is currently at S = $100. After one period, the price will move to one of the following two values: [uS and dS], where [u = 1.2; d = 0.9]. A $1.00 investment in the risk-free asset using continuous compounding will return $1.10 at th..

Opportunity tax credit : Timothy and Alice, who are married with modified AGI of $90,000, are sending their daughter to her first year of college. Their total tuition and related payments during the year amounted to $13,000. In addition, their daughter received a $10,000 sch..

Would the firm add the division : Assume that the firm in 12 above can add a new division at a cost of $80,000, which will increase NOPAT by $15,200. Would the firm add the division?

Describe profitable strategy : Calc the Put-Call Parity for the following situation and Analyze the following topics: Stock Price = $40; Strike Price = $35; Risk free rate =3%; Call Price = $8 (1 yr expire); Put Price = $1 (1 yr. expire) Describe a profitable strategy

Calculate the profit or loss on this transaction : You are a manager of a pension fund that specializes in smaller stocks. The market has been going up for the last 4 years and you are expecting a correction. Instead of selling the stocks, you decide to sell a Nasdaq 100 futures contract at a price o..

User Account

All Pages