April 2001 Q2 (ii) (a)

I can't seem to get my numbers to add up for this question.

Sorry my pc won't let me type nice formulae (that'll teach me) but the general jist is that

new option price = p + change in p

= p +df/dr (change in r) + df/d(vol) (change in volatility) + df/dt (change in t) + df/ds (change in s) + 1/2 d^2f/ds^2 (change in s)^2

which gives me
=25.04 + (0.42949)(-0.5) + (1.15379)(2) + (-0.04503)(1) + (0.53981)(10) + (0.5)(0.00689)(100)
=32.83

which is not the 32.26 they give.

Where am I going wrong?

 

it should be 32.83, i can confirm that....the solution is wrong

 

Ahhhhhhh. That makes me feel better. Thanks

 

My revision notes also gives the same, 32.83

Have you guys ever ordered revision notes.
They are the best thing since sliced bread.
All past exam papers with CORRECT solutions.
I can't imagine having to work with those rediculous examiner reports and all its "typo's".

Cheers.
Erik

 

Next time. It might save me ages of wondering where I'm going wrong