American style

Under what circumstances does the investor make a profit? Sketch how the value of the option varies with the stock price three months out, one month out, and on maturity.

Homework AD 717 Week 11 Problem 1. An investor buys a European style put option. The stock price is $42 and the strike price is $40. The option has ninety days until maturity. The risk-free rate stands at 1.6%, and the volatility of the stock returns is 49%. a) What is the price of the […]

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