Chapter 26, Problem 12PS

Summary Introduction

(a)

To calculate:

The average value and the standard deviation of gross monthly payouts on the put options over the 10-year period i.e. $\text{October}1977-\text{September }1987$ .

Introduction:

The put options are those type of options in which the expectation is of price fall of that stock. The writer of put options earn gain on these from the excess of strike price over stock price.

Summary Introduction

(b)

To calculate:

The average value and the standard deviation of gross monthly payouts on the put options over the 10-year period i.e. $\text{October}1977-\text{October }1987$ i.e. extension of one month to include in calculation i.e. $\text{October }1987$ .

Introduction:

The put options are those type of options in which the expectation is of price fall of that stock. The writer of put options earn gain on these from the excess of strike price over stock price.

Summary Introduction

(c)

To detemine:

The observation about the risk which is a tail risk in naked put writing.

Introduction:

The put options are those type of options in which the expectation is of price fall of that stock. The writer of put options earn gain on these from the excess of strike price over stock price.