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by Table For N, 3.678, 0.247, TURE N

The probability that a European call option on the stock will be exercised is 49.68%. The probability that a European put option on the stock will be exercised is 50.32%. The implied volatility of a call option with a market price of $2.50, stock price of $15, exercise price of $13, time to maturity of 3 months, and risk-free interest rate of 5% per annum is 39.63%.

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54 views1 page

by Table For N, 3.678, 0.247, TURE N

The probability that a European call option on the stock will be exercised is 49.68%. The probability that a European put option on the stock will be exercised is 50.32%. The implied volatility of a call option with a market price of $2.50, stock price of $15, exercise price of $13, time to maturity of 3 months, and risk-free interest rate of 5% per annum is 39.63%.

Uploaded by

ly21171007cynthia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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13.9. A stock price has an expected return of 16% and a volatility of 35%.

The current
price is $38.

(a) What is the probability that a European call option on the stock with an exercise
price of $40 and a maturity date in six months will be exercised?
6
S0 =38 K =40 μ=16 % σ =35 % T = =0.5
12

( )
2
0.35
0.5 , 0.35 √ 0.5)
2
ln ST ∅ (ln 38+ 0.16−
2
ln ST ∅ ( 3. 687 , 0.0 6125 ) , √ 0.0 6125=0.247=σ T

by Table for N ( 0.08 )∨NORM . DIST ( ln ( 40 ) , 3.678 , 0.247 ,TURE )

N ( ln ( 400.2)−3.47 687 )=N ( 0.08)=0.5032


1−0.5032=0 .4968

(b) What is the probability that a European put option on the stock with the same
exercise price and maturity will be exercised?

0.4968=P(ST ≥ 40)
P ( S T ≤ 40 ) =1−0.4968=0.5032

13.15. A call option on a non-dividend-paying stock has a market price of $2.50. The
stock price is $15, the exercise price is $13, the time to maturity is three months, and
the risk-free interest rate is 5% per annum. What is the implied volatility?
3
c=2.5 S 0=15 K=13 T = =0.25 r=0.05
12

( )( )
2
15 σ
ln + 0.05− 0.25
13 2
d 1= ， d 2=d1 −σ √ 0.25
σ √ 0.25
−rT
c=S 0 N ( d 1 ) −K e N (d 2)
when σ =0.2 ， c =2.20
when σ =0. 3 ， c=2.32
when σ =0. 4 ， c=2. 507
2.507 x +2.32 (1−X ) =2.5 , X=0.963 (interpolation)
σ =0.3963(can also give by DerviaGem Black Sholes Europen)

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