Chapter 17. Options on Stock Indices and Currencies
17.2, 17.3, 17.7, 17.10, 17.11
Chapter 18. Futures Options
18.1, 18.14, 18.15
17.2, 17.3, 17.7, 17.10, 17.11
Chapter 18. Futures Options
18.1, 18.14, 18.15
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17.2
“Once we know how to value options on a stock paying a dividend yield, we know how to value options on stock indices and currencies.” Explain this statement.
17.3
A stock index is currently 300, the dividend yield on the index is 3% per annum, and the risk–free interest rate is 8% per annum. What is a lower bound for the price of a six–month European call option on the index when the strike price is 290?
17.7
Calculate the value of an eight–month European put option on a currency with a strike
price of 0.50. The current exchange rate is 0.52, the volatility of the exchange rate is 12%, the domestic risk–free interest rate is 4% per annum, and the foreign risk–free interest rate is 8% per annum.
17.10
Consider a stock index currently standing at 250. The dividend yield on the index is 4% per annum, and the risk–free rate is 6% per annum. A three–month European call option on the index with a strike price of 245 is currently worth $10. What is the value of a three–month put option on the index with a strike price of 245?
17.11
An index currently stands at 696 and has a volatility of 30% per annum. The risk–free
rate of interest is 7% per annum and the index provides a dividend yield of 4% per
annum. Calculate the value of a three–month European put with an exercise price of 700.
18.1
Explain the difference between a call option on yen and a call option on yen futures.
18.14
A futures price is currently 25, its volatility is 30% per annum, and the risk–free interest rate is 10% per annum. What is the value of a nine–month European call on the futures with a strike price of 26?
18.15
A futures price is currently 70, its volatility is 20% per annum, and the risk–free interest rate is 6% per annum. What is the value of a five–month European put on the futures with a strike price of 65?
17.2
“Once we know how to value options on a stock paying a dividend yield, we know how to value options on stock indices and currencies.” Explain this statement.
17.3
A stock index is currently 300, the dividend yield on the index is 3% per annum, and the risk–free interest rate is 8% per annum. What is a lower bound for the price of a six–month European call option on the index when the strike price is 290?
17.7
Calculate the value of an eight–month European put option on a currency with a strike
price of 0.50. The current exchange rate is 0.52, the volatility of the exchange rate is 12%, the domestic risk–free interest rate is 4% per annum, and the foreign risk–free interest rate is 8% per annum.
17.10
Consider a stock index currently standing at 250. The dividend yield on the index is 4% per annum, and the risk–free rate is 6% per annum. A three–month European call option on the index with a strike price of 245 is currently worth $10. What is the value of a three–month put option on the index with a strike price of 245?
17.11
An index currently stands at 696 and has a volatility of 30% per annum. The risk–free
rate of interest is 7% per annum and the index provides a dividend yield of 4% per
annum. Calculate the value of a three–month European put with an exercise price of 700.
18.1
Explain the difference between a call option on yen and a call option on yen futures.
18.14
A futures price is currently 25, its volatility is 30% per annum, and the risk–free interest rate is 10% per annum. What is the value of a nine–month European call on the futures with a strike price of 26?
18.15
A futures price is currently 70, its volatility is 20% per annum, and the risk–free interest rate is 6% per annum. What is the value of a five–month European put on the futures with a strike price of 65?
