MGMT 6150 Creating Sustainable Solutions Through Systems Thinking
Suppose the current value of a popular stock index is 653.50 and the dividend yield on the index is 2.8%. Also, the yield curve is flat at a continuously compounded rate of 5.5%.
- If you estimate the volatility factor for the index to be 16%, calculate the value of an index call option with an exercise price of 670 and an expiration date in exactly three months.
Current value without dividend = $653.5*100% / (100%-2.8%) = $672.33
Deadline Approaching? Get Fast, Reliable Help with Your Essay Now!
Simply post your question and get it answered by a professional tutor. It's as simple as that!
Write My Essay For MeAt compounded of 5.5%, $672.33 gives 670
One standard move = 670 * 16% * [(90/360)]^(1/2) = ± $26.8
Volatility lies between $643.2 (670 – 26.8) and $696.8 (670 + 26.8)
b. If the actual market price of this option is $17.40, calculate its implied volatility coefficient.
One standard move = $17.4 * 16% * [(90/360)]^(1/2) = ± $0.7
Volatility lies between $16.8 (17.5 – 0.7) and $18.2 (17.5 +0.7)
c. Besides volatility estimation error, explain why your valuation and the option’s traded price might differ from one another.
The difference is due to changes in the time that may affect the one standard move of the given price of options.
MGMT 6150 Creating Sustainable Solutions Through Systems Thinking MGMT 6150 Creating Sustainable Solutions Through Systems Thinking
Do you find yourself approaching a tight assignment deadline? We have a simple solution for you! Just complete our order form, providing your specific instructions. Rest assured that our team consists of professional writers who excel in their respective fields of study. They utilize extensive databases, top-notch online libraries, and up-to-date periodicals and journals to ensure the delivery of papers of the utmost quality, tailored to your requirements. Trust us when we say that thorough research is conducted for every essay, and our expertise in various topics is unparalleled. Furthermore, we have a diverse team of writers to cover a wide range of disciplines. Be assured that all our papers are created from scratch, guaranteeing originality and uniqueness.
Write my essays. We write papers from scratch and within your selected deadline. Just give clear instructions and your work is done
