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Leni [432]
3 years ago
6

Let S = $100, K = $120, σ = 30%, r = 0.08, and δ = 0. a. Compute the Black-Scholes call price for 1 year to maturity and for 10

years to maturity. What happens to the option price? b. Set δ = 0.001. Repeat (a). Now what happens to the option price? What accounts for the difference?
Business
1 answer:
Andrej [43]3 years ago
7 0

Answer: a. The black-scholes call price for 1 year is 0.

For 10 years it is also 0.

Option price did not change.

b. When δ is 0.001, the black-scholes call price for 1 year is 450.012.

For 10 years it is 450.0012.

The option price changed from 450.012 to 450.0012.

The difference was due to the change of δ value from 0 to 0.001.

Explanation: using the black-scholes equation below option price is callculated based on the given values.

δk/δt+1/2σsquare×Ssquare×δsquare×k/δS+rS×δk/δS-rk=0

By calculations the options prices were obtained for the first value of δ=0 both for 1 year and 10 years and compared with when the value of δ was changed to 0.001

A change in option price was also observed as the δ values changed this lead to the difference observed.

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Answer:

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We multiply them and get the future value factor:

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Answer:

a. Know each other better

Explanation:

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This ultimately implies that, a team comprises of individuals, workers or employees having complementary skills, knowledge and experience needed to execute a project or task successfully. Therefore, a worker that is working in a team is usually privileged to interact with the other members of the team and as a result, this enhances performance and strengthen the level of relationship they share.

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3 years ago
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marin [14]

Answer:

7.69%

Explanation:

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vlada-n [284]

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