Suppose the stock price is 40 and we need to price a call option with a strike of 45 maturing in 4 months. The stock is not expected to pay dividends. The continuously-compounded riskfree rate is 3%/year, the mean return on the stock is 6%/year, and the standard deviation of the stock return is 40%/y
Suppose the stock price is 40 and we need to price a call option with a strike of 45 maturing in 4 months. The stock is not expected to pay dividends. The continuously-compounded riskfree rate is 3%/year, the mean return on the stock is 6%/year, and the standard deviation of the stock return is 40%/y
Chapter20: Financing With Derivatives
Section20.A: The Black-scholes Option Pricing Model
Problem 1P
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Suppose the stock price is 40 and we need to price a call option with a strike of 45 maturing in 4 months. The stock is not expected to pay dividends. The continuously-compounded riskfree rate is 3%/year, the mean return on the stock is 6%/year, and the standard deviation of the stock return is 40%/year.
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