ABC stock is currently trading at 100. In the next period, the price will either go up by 10% or down by 10%. The risk-free rate of interest over the period is 5%. What is the delta for the put option on ABC for a strike 100? +0.67 -0.5 +0.5

ABC stock is currently trading at 100. In the next period, the price will either go up by 10% or down by 10%. The risk-free rate of interest over the period is 5%. What is the delta for the put option on ABC for a strike 100? +0.67 -0.5 +0.5

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: A stock trades today at $73.14. (a) Write down the intrinsic value of a call option with strike…

A: Here, Stike Price (X) is $72.50 Stock price (S0) is $73.14

Q: A stock is currently priced at $35 and will move up by a factor of 1.18 or down by a factor of .85…

A: Stock price = $35Up-move factor = 1.18Down factor = 0.85Risk free rate = 3%Strike price = $40To…

Q: 1. A nondividend-paying stock is currently priced at $76. 2. In one year, there will only be two…

A: To calculate the number of shares of stock that must be purchased to replicate the put option, we…

Q: Give typing answer with explanation and conclusion A call option has a strike price of $11, and a…

A: Value of call option will be calculated using formula : C = S × N(d1) - N(d2) × PV. (K)where, C…

Q: Use Excel’s data table feature to construct a Two-Way Data Table to demonstrate the impact of the…

A: Black-Scholes option pricing model is a method used to find out the value of the put option. In an…

Q: 5. Given: Today's stock price is 37. One month from now, the stock price will be either 35 or 40. If…

A: Let's break down the binomial tree construction and option valuation process in even greater detail,…

Q: Consider a European put and a European call option which are both written on a non-dividend paying…

A: Here, Strike Price is £80 Spot Price is £90 Time Period is 2 months Put Price is £21 Call Price is…

Q: stock is currently priced at $48 and will move up by a factor of 1.1 or down by a factor of .67 each…

A: Option Market is a Stock Market Strategy. Under which investor will not purchase the shares of the…

Q: Consider a 3-month European call option on a non-dividend-paying stock. The current stock price is…

A: The call option is an instrument that allows its holder to buy the underlying asset at a fixed…

Q: A stock is currently selling for $49. Over the next two periods, the stock will move up by a factor…

A: First, we need to calculate the possible stock prices at the end of each period. The stock price can…

Q: A stock is selling for $32.70. The strike price on a put, maturing in one year, is $35. The possible…

A: The binomial pricing model is used to price options where the future price of the underlying stock…

Q: yield on the index is 4.3%. a. What is the return on the index over the year? (Do not round…

A: The holding period return is assigned with total return. Stock Index is average of stocks of all…

Q: A stock is currently trading at $25 per share and has a volatility of 30% per annum. Suppose this…

A: To calculate the value of a European put option using the binomial model, we can use the following…

Q: risk-free rate of 5% per annum. Use the Black - Sholes - Merton model to price this option. 1)…

A: An option is an agreement between two parties granting one the opportunity to buy or sell a security…

Q: Suppose that a stock price is currently 70 dollars, and it is known that at the end of each of the…

A: An American Put option is a financial contract that grants the holder the right, but not the…

Q: The current price of a non-dividend paying stock is $30. Use a two -step tree to value a European…

A: The binomial options pricing model refers to the technique of pricing options where the price of the…

Q: IBM stock currently sells for 100 dollars per share. The implied volatility equals 20.0. The…

A: The delta of a call option is a measurement that represents the sensitivity of the option's price to…

Q: Consider the following information on a particular stock: Stock price = $88 Exercise price = $84…

A: Given Data:S = Current stock price K = Strike price (exercise price) r = Risk-free annual interest…

Q: IBM stock currently sells for 100 dollars per share. The implied volatility equals 20.0. The…

A: A call option is a contract that provides its holder with the choice of purchasing the underlying…

Q: IBM stock currently sells for 64 dollars per share. The implied volatility equals 40.0. The…

A: A call option gives its holder the choice to purchase the underlying asset at the predetermined…

Q: The Nasdaq 100 index is cur interest rate is 5.2% and dividend yield is 1.58%, both continuously…

A: Current price=16562Interest rate=5.2%Dividend yield=1.58%Period=208 days

Q: A power option pays off [max(S₁ – X),0]² at time T where ST is the stock price at time T and X is…

A: To calculate the risk-neutral probability, we can use the fact that the price of the power option is…

Q: IBM stock currently sells for 44 dollars per share. Over 5 months the price will either go up by…

A: > Now calculate Dleta of put option: Delta = end text fraction numerator text Pu-Pd end text over…

Q: A stock is currently selling for $30. Over the next two periods, the stock will move up by a factor…

A: The call option is a type of customized derivative contract that gives investors the right, but no…

Q: A stock is currently priced at $42 and will move up by a factor of 1.23 or down by a factor of .91…

A: Option Market is a Stock Market Strategy. Under which investor will not purchase the shares of the…

Q: A stock is selling today for $110. The stock has an annual volatility of 64 percent and the annual…

A: Hi there, Thanks for posting the question. As per our Q&A guidelines, we should answer the first…

Q: What is the risk-free rate of return?

A: An option is an agreement between two parties granting one the opportunity to buy or sell a security…

Q: A stock is currently selling for $45. Over the next two periods, the stock will move up by a factor…

A: A call option is a derivative instrument that allows the investor to buy the underlying asset at a…

Q: IBM stock currently sells for 64 dollars per share. The implied volatility equals 40.0. The risk -…

A: A call option gives its holder the choice to purchase the underlying asset at the predetermined…

Question

ABC stock is currently trading at 100. In the next period, the price will either go up by
10% or down by 10%. The risk-free rate of interest over the period is 5%.
What is the delta for the put option on ABC for a strike 100?
O +0.67
O-0.5
O +0.5
O -0.33
O None of these

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Brief description

VIEW

Step 2: Calculation

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Consider a call option on one share of BP with a strike price of $70 and exercise time 1 quarter (3 months). Suppose the current stock price for BP is S(0) = $65 per share. Suppose further that A(0) = $100, A(1) = $102 and two possible prices for S(1) are S $74 with probability 0.5, S(1) = $66 with probability 0.5. Evaluate the expected returns E(Ks) and E(Kc) for the stock and the option.
IBM stock currently sells for 84 dollars per share. Over 8 months the price will either go up by 7.5 percent or down by -3.0 percent. The risk-free rate of interest is 4.5 percent continuously compounded. A call option with strike price 83 and maturity of 8 months has a delta of 0.82766. What is the value of this call option? 0.62579 O2.6708 O4.0788 2.9324 O4.3788
Assume that a $60 strike call has a 2.0% continuous dividend, r = 5%, the stock price is $61.00, and the volatility is 20%. What is the theta of the option as the expiration time declines from 60 to 50 days? Answer to 2 decimal places. Correct Answers Between -0.2 and -0.18
When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 5%, the volatility is 20% and the time to maturity is 3 months which of the following is the price of a European put option on the stock? N(.) denotes standard normal distribution values. O 20N(-0.1)-20N(-0.2) 20N(-0.2)-20N(-0.1) O 19.7N(-0.2)-20N(-0.1) O None of these O 19.7N(-0.1)-20N (-0.2)
Find the implied volatility (to 2 decimals, for example, �=8.23% ) of a Put option with a time to expiration of 11 months and a price of $6.13 The stock is currently trading at $47. The riskless rate is 2% per annum, and the strike/exercise price of the option is $50. Hint: compute the Put price using the same formula as in exercise 4 , as a function of the volatility �. Then use Solver to change the volatility cell in order to obtain a price of $6.13 \table[[�1=,-0.0614997,,So =,47],[�2=,,4,�=,50],[,,,�=,2%
A stock is currently selling for $39. In one period, the stock will move up by a factor of 1.29 or down by a factor of .53. A call option with a strike price of $50 is available. If the risk-free rate of interest is 2.5 percent for this period, what is the value of the call option?
Suppose the 6-month Mini S&P 500 futures price is 1,168.44, while the cash price is 1,150.55. What is the implied dividend yield on the S&P 500 if the risk-free interest rate is 4.3 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Implied dividend yield %

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS