Current stock price for XYZ Interest rate Dividend rate Option PUT PUT PUT PUT CALL CALL CALL CALL Strike $30 $40 $50 $50.75 $50 $50.75 $55 $60 Expiration 6-months 6-months 6-months 6-months 6-months 6-months 6-months 6-months $50 3% 0% Option price $0.14 $0.77 $2.74 $2.97 $3.48 $2.97 $1.20 $0.15 Implied Vol 40% 32% 22% 21% 22% 21% 19% 15% Delta (AOption/ AS) -0.023 -0.123 -0.431 -0.470 0.569 0.530 0.299 0.065 a) Recall the general formula (in terms of S(t), r, q, t, T) for the forward price of a stock for delivery date T: [Forward price for delivery date T] = S(t) * exp ((r — q) (T − t)) In this example, is the forward price for delivery in 6 months higher or lower than the current price of $50? b) The put-call parity relationship: [Price of K STRIKE CALL (Expiry T)] - [Price of K Strike PUT (Expiry T)] = [Value of Forward contact with invoice price K (Delivery date T)] Looking at the table. At what strike do the put and the call have the same value? Is this consistent with put-call parity?
Current stock price for XYZ Interest rate Dividend rate Option PUT PUT PUT PUT CALL CALL CALL CALL Strike $30 $40 $50 $50.75 $50 $50.75 $55 $60 Expiration 6-months 6-months 6-months 6-months 6-months 6-months 6-months 6-months $50 3% 0% Option price $0.14 $0.77 $2.74 $2.97 $3.48 $2.97 $1.20 $0.15 Implied Vol 40% 32% 22% 21% 22% 21% 19% 15% Delta (AOption/ AS) -0.023 -0.123 -0.431 -0.470 0.569 0.530 0.299 0.065 a) Recall the general formula (in terms of S(t), r, q, t, T) for the forward price of a stock for delivery date T: [Forward price for delivery date T] = S(t) * exp ((r — q) (T − t)) In this example, is the forward price for delivery in 6 months higher or lower than the current price of $50? b) The put-call parity relationship: [Price of K STRIKE CALL (Expiry T)] - [Price of K Strike PUT (Expiry T)] = [Value of Forward contact with invoice price K (Delivery date T)] Looking at the table. At what strike do the put and the call have the same value? Is this consistent with put-call parity?
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
Related questions
Question
![Current stock price for XYZ
Interest rate
Dividend rate
Option
PUT
PUT
PUT
PUT
CALL
CALL
CALL
CALL
Strike
$30
$40
$50
$50.75
$50
$50.75
$55
$60
Expiration
6-months
6-months
6-months
6-months
6-months
6-months
6-months
6-months
$50
3%
0%
Option price Implied Vol
$0.14
$0.77
$2.74
$2.97
$3.48
$2.97
$1.20
$0.15
40%
32%
22%
21%
22%
21%
19%
15%
Delta
(AOption/
AS)
-0.023
-0.123
-0.431
-0.470
0.569
0.530
0.299
0.065
a) Recall the general formula (in terms of S(t), r, q, t, T) for the forward price of a stock for
delivery date T:
[Forward price for delivery date T] = S(t) * exp ((r — q) (T − t))
In this example, is the forward price for delivery in 6 months higher or lower than the current
price of $50?
b) The put-call parity relationship:
[Price of K STRIKE CALL (Expiry T)] - [Price of K Strike PUT (Expiry T)] =
[Value of Forward contact with invoice price K (Delivery date T')]
Looking at the table. At what strike do the put and the call have the same value? Is this
consistent with put-call parity?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F00828718-2df8-4d22-87de-a2e53e10f924%2Ff7d1eea6-d98d-4ad0-bd14-d3a36f5bc920%2Fd76xh65_processed.png&w=3840&q=75)
Transcribed Image Text:Current stock price for XYZ
Interest rate
Dividend rate
Option
PUT
PUT
PUT
PUT
CALL
CALL
CALL
CALL
Strike
$30
$40
$50
$50.75
$50
$50.75
$55
$60
Expiration
6-months
6-months
6-months
6-months
6-months
6-months
6-months
6-months
$50
3%
0%
Option price Implied Vol
$0.14
$0.77
$2.74
$2.97
$3.48
$2.97
$1.20
$0.15
40%
32%
22%
21%
22%
21%
19%
15%
Delta
(AOption/
AS)
-0.023
-0.123
-0.431
-0.470
0.569
0.530
0.299
0.065
a) Recall the general formula (in terms of S(t), r, q, t, T) for the forward price of a stock for
delivery date T:
[Forward price for delivery date T] = S(t) * exp ((r — q) (T − t))
In this example, is the forward price for delivery in 6 months higher or lower than the current
price of $50?
b) The put-call parity relationship:
[Price of K STRIKE CALL (Expiry T)] - [Price of K Strike PUT (Expiry T)] =
[Value of Forward contact with invoice price K (Delivery date T')]
Looking at the table. At what strike do the put and the call have the same value? Is this
consistent with put-call parity?
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