The purpose of this problem is to price options based on real data with the Black-Scholes model. Consider your selected stock for the semester (used in Prob. 2 of HW#4) and the same options considered in that problem. Remember that the parameters μ and σ were already estimated in part (a) of that problem. You are welcome to consider the dates and parameters obtained then, or reestimate the data with more up-to-date data, it's up to you. Also notice that the parameter μ for the Black-Scholes model is slightly different than it is for the CRR model. (a) Price the call options using the Black-Scholes formula, using the parameters esti- mated from your data. (b) Compare your results to the market price and comment on the accuracy of your results and what could explain the differences. (c) Repeat question (a) and (b) for the put options, either using the Black-Scholes formula for a put or the put-call parity formula (see Prob. 1). Comment on the accuracy of your results and explain any discrepancies between your estimate and the market price.

The purpose of this problem is to price options based on real data with the Black-Scholes model. Consider your selected stock for the semester (used in Prob. 2 of HW#4) and the same options considered in that problem. Remember that the parameters μ and σ were already estimated in part (a) of that problem. You are welcome to consider the dates and parameters obtained then, or reestimate the data with more up-to-date data, it's up to you. Also notice that the parameter μ for the Black-Scholes model is slightly different than it is for the CRR model. (a) Price the call options using the Black-Scholes formula, using the parameters esti- mated from your data. (b) Compare your results to the market price and comment on the accuracy of your results and what could explain the differences. (c) Repeat question (a) and (b) for the put options, either using the Black-Scholes formula for a put or the put-call parity formula (see Prob. 1). Comment on the accuracy of your results and explain any discrepancies between your estimate and the market price.

Algebra & Trigonometry with Analytic Geometry

13th Edition

ISBN:9781133382119

Author:Swokowski

Publisher:Swokowski

Chapter7: Analytic Trigonometry

Section7.6: The Inverse Trigonometric Functions

Problem 92E

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