Consider a two-period binomial model for the stock price with both periods of length one year. Let the initial stock price be S(0) =GH¢100 and assume that the stock pays no dividends. Let the up and down factors be u = 1.25 and d = 0.75, respectively. Let the continuously compounded interest rate be r = 0.05 per annum. Oliver is interested in purchasing a chooser option with the provision that he can choose if the option is a put or a call after one year. The strike for this option is GH¢100 and the expiry date is two years. Find the price of the chooser option.

Q: If a particular stock does not pay dividends and is currently priced at $24 per share, what should…

A: Put-call parity concept helps to find the price of the call option. Following is the put-call parity…

Q: e Black-Scholes price of a call option on a stock which does not pay dividends and has the…

A: The given problem relates to Black Scholes Model.

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A: The option pricing refers to the determination of the present value of expected option pieces. The…

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A: European call option used to give an owner the right for acquiring an underlying security at an…

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A: Working: Up factor (u) = 1.10 and down factor (d) = 0.95 Stock Value in year 1 if increase =…

Q: Suppose that an investor buy a call option on IBM stock with strike price X = 60 USD, which has 6…

A: A call option is a type of contract where the buyer of the call option has the choice of buying the…

Q: You use the standard binomial model and the following information to construct a one-period binomial…

A: First we need to calculate, the risk neutral probabilities which are  given by P = upside…

Q: For a non-dividend paying stock with price S(t) at time t, you are given the followings: • The…

A: Stock Price = 80 Rate of return = 0.12 Volatility = 0.3

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A: The given problem can be solved using put call parity.

Q: Your broker has recommended that you purchase stock in Alacan, Inc. She estimates that the 1-year…

A: Cost of equity = Rf + Beta * ( Rm - Rf ) = 2.70% + 0.91 * 9.50% = 2.70% + 8.645% = 11.345%

Q: The current price of a non-dividend-paying stock is $100. The risk free interest rate is 1% per year…

A: Dividends are considered as returns to the shareholders after distributing profits. There's a…

Q: Use the Black scholes formular to  find the call option price given the following informatio

A: Information Provided: Stock price = 40 Strike = 45 Time = 4 months Risk free rate = 3% continuously…

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A: Calculate the probabilities: p is 57.37% and 1-p is 42.63%.

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A: Call option gives the buyer of call a right to buy the stock at a pre-determined price Put option…

Q: Consider a two-period binomial model for a stock with current price being $2 and with the up…

A: Given:

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A:

Q: onsider the following data for a certain stock: Price of the stock now = 50 = Rs.150 Exercise price…

A: The Black-Scholes model is a popular mathematical model for valuation of the European style of…

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A:

Q: Given a American put option, use a binomial tree with monthly steps h=1/12 that is step length. Let…

A:

Q: and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%,…

A: in this we have to use binomial distribution formula for calculating the price of option.

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A: The call value is the PV of the expected cashflows in the future.

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A: Stock price is $100 Strike price is $99 Risk free rate is 6% Upmove and down move movement is 8%…

Q: ppose the stock price is 40 and we need to price a put option with a strike of 45 maturing in 4…

A: The given problem relates to black-Scholes Model.

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Q: American

A: Formula to calculate the risk neutral probability is: p = e^rh - d         u - d

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Q: Suppose you are attempting to value a 1-year expiration option on a stock with volatility (i.e.,…

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Q: Suppose Carol's stock price is currently $20. If the standard deviation of the continuously…

A: Standard deviation = 60% Price of stock = $20 Time period = 6 Months  Risk free rate = 1% u =…

Q: Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a…

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Q: Rebecca is interested in purchasing an European call on a hot new stock, Up, Inc. The call has a…

A: a) Black - Scholes model: C=S×N(d1)−PV(K)×N(d2)d1=lnS/PV(K)σT+σT2 and d2=d1-σT

Q: a) What is the value of call options today? b) What is the value of the put options today if the…

A: Put Option: A put option allows the buyer to exercise the option when the price of underlying falls.…

Q: Suppose an investor sells 100 stocks by short selling for 6 months, the stock price is 30 yuan, and…

A: Number of Stocks =100 Short sell t =6 months r =3% Stock spot Price = 30yuan Forward Rate = Spot…

Q: ose the stock price is 40 and we need to price a call option with a strike of 45 maturing in 4…

A: The given problem relates to black and scholes model.

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.