Problem:
The Dow Jones Industrial Average on January 12, 2009 was 8474 and the price of the March 84 call was $4.50. Assume the risk-free rate is 3.2%, the dividend yield is 2% and the option expires on March 20, 2009 (Note that the options are on the DJI dividend by 100.)
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 March 84 put.
Q3: Given the price determined in Q2, use Derivagem to calculate the implied volatility of the put option.