- +1-530-264-8006
- info@tutorsglobe.com

Calculate the implied volatility of the call option

Assignment: The Dow Jones Industrial Average on August 15, 2008 was 11,660 and the price of the December 117 call was $3.50. Assume the risk-free rate is 4.2%, the dividend yield is 2% and the option expires on December 25 (options markets are closed the day after Christmas).

Q1: Use Derivagem to calculate the implied volatility of the call option.

Q2: Use put-call parity to estimate the no arbitrage price of a December 117 put.

Q3: Given the price determined in Q2, use Derivagem to calculate the implied volatility of the put option.

Q4: What do you conclude about put-call parity and implied volatility for European options

Adapted from Fundamentals of Futures and Options Markets, 6th ed., John C. Hull.

Now Priced at $25 (50% Discount)

Recommended **(92%)**

18,76,764

Questions

Asked

21,311

Experts

9,67,568

Questions

Answered

Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

Submit Assignment
## Q : What is the pv of future salary payments

If the discount rate is 8 percent, what is the PV of these future salary payments?