Describe the black-scholes option pricing formula, Corporate Finance

Assignment Help:

Question:

a) Write down and describe the Black-Scholes option pricing formula with respect to the various determinants of option prices.

b) Determine the price of a European call option on a non-dividend paying stock given that the stock price is $32, the strike price is $30 and the risk-free rate is 10% per annum, the volatility is 20% per annum and the time to maturity is four months?

c) Consider equal premiums, consider the payoff profiles for buying a put and selling a call option on the Yen. Both options are at the money.

i) Show the payoff profile of the options and the combination on the same diagram.

ii) What is the name provided to this combination and how might it be used for arbitrage?


Related Discussions:- Describe the black-scholes option pricing formula

? The effect of incorrect recognition of revenue on, A? The effect of incor...

A? The effect of incorrect recognition of revenue on financial reportssk question #Minimum 100 words accepted#

Determination of the best ordering policy in organisation, Determination of...

Determination of the Best Ordering Policy in Service Organisations In service organisations, the role of procurement is less developed than in manufacturing. This has been due

Accumulated dividend, It is a dividend on a share of cumulative preferred s...

It is a dividend on a share of cumulative preferred stock that has not still being paid to the shareholder. Accumulated dividends are the product of dividends that are carried forw

Describe the determinants of corporate failures, Professor Steward Hamilton...

Professor Steward Hamilton wrote a case on the Enron collapse. He stated that when Enron failed and filed for bankruptcy protection on December 2001, the entair world came to a sh

Liquidity, What are the objectives of determinants of liquidity?

What are the objectives of determinants of liquidity?

Cash flow from an income statement, Describe how to build a cash flow from ...

Describe how to build a cash flow from an income statement.

Describe the mechanism of an interest rate swap, Question 1: Participan...

Question 1: Participants in a recent radio discussion on the WTO were full of ideas. The WTO could do this, the WTO should do that, they said. One of them finally interjected:

Participative budgeting, You are required to provide an essay or report of ...

You are required to provide an essay or report of approx 500 words or less (excluding attachments and references),  accompanied by relevant calculations, in MS Word orPDF format ac

Corporate finance and governance perspective, From a Corporate Finance and ...

From a Corporate Finance and Governance perspective, the IMP is about answering three fundamental questions: 1. How much value does the organisation create/destroy today? 2.

Economic value added-cost of equity , Course assessment: Company direct...

Course assessment: Company directors often believe that the stock market fails "correctly" to value the firms they manage, while investors are often alarmed by the volatility i

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd