T
Trainee_Act
Member
Hi,
Hopefully someone can help me.
Sept 2016 Q7(ii)
Let S0 = 50 and let the price rise by 10% or fall by 5% each month for the next 3 months. Assume risk-free rate is 5% pa.
q = (exp(0.05*3/12) – 0.95)/(1.1-0.95) = 0.3612
April 2017 Q5(i)
Consider a European put option on this stock, with maturity in three months (i.e. at time t = 3) and strike price $90.
q = (exp(0.0025) – 0.85)/(1.18-0.85) = 0.4621
How do we know when to put a fraction of time into the exp term when trying to calculate q?
Thanks
Hopefully someone can help me.
Sept 2016 Q7(ii)
Let S0 = 50 and let the price rise by 10% or fall by 5% each month for the next 3 months. Assume risk-free rate is 5% pa.
q = (exp(0.05*3/12) – 0.95)/(1.1-0.95) = 0.3612
April 2017 Q5(i)
Consider a European put option on this stock, with maturity in three months (i.e. at time t = 3) and strike price $90.
q = (exp(0.0025) – 0.85)/(1.18-0.85) = 0.4621
How do we know when to put a fraction of time into the exp term when trying to calculate q?
Thanks