1.

- Price the 9 month put and call options with a strike price of $85 over a stock currently trading at
$86.15 that has a volatility of 48% pa, when the continuously compounded risk free rate is 0.75%.

Information
T =9 month=9/12=0.75 y
X =85
Po =86.15
σ =0.48
r =0.751=0.00075

Equations
x
V c =Po N d 1− Nd 2
erft

Po

d 1=
{[ ] (
¿
x
+ r+ σ 2 ) ∙t }
σ √t

Po

d 1=
{[ ]
¿
85
+ ( 0.00075+(0.08)2 ) ∙ 0.75 }
0.90 √ 0.15

{ 0.013438+ ( 0.2379 ) ∙ 0.75 }

d 1=
0.41569
0.19163
d 1=
0.91569
d 1=0.46099

N (0.46 )=0.6672=0.68

d 2=d 1−σ √ t

d 2=0.46099−( 0.48 √ 0.75 )

d 2=0.045301

N (0.04 )=0.5160 ≈ 0.52

 85
V c =86.15−0.68− 0.0075 ( 0.75)
∙ 0.52
e
V c =58.62

V c =$ 14.60

x
V p=V c + −Po
e rt
85
V p=14.6099+ 0.0075(0.75)
−86.15
e
V p=$ 12.98

2.- Price the 7 day put and call options with a strike price of $2 over a stock currently trading at $1.97
that has a volatility of 42% pa, when the continuously compounded risk-free rate is 0.75%.

Information
T =7 days=0.01917 y
X =$ 2.00
Po =$ 1.97
σ =0.42
I RF =0.0075

Equations
x
V c =Po N d 1− N d2
ert
x
V p=V c + −Po
e rt

Po

d 1=
{[ ]
¿
x
+ ( r+ ∂2 ) ∙ t }
σ √t

{−0.01511+ ( 0.0075+0.1764 ) ∙ 0.019117 }

d 1=
0.42 √ 0.0017
 −0.01158
d 1=
0.05815
d 1=−0.19921

N d 1=0.4247

d 2=d 1−σ √ t

d 2=0.19921−( 0.42 √ 0.01917 )

d 2=−0.25736

N d 2=0.4013

2
V c =1.97−0.4247− 0.0075 ( 0.0147 )
∙ 0.4013
e
V c =0.83665−0.80248

V c =$ 0.03

x
V p=V c + −Po
e rt
85
V p=0.03+ 0.0075(0.75)
−1.97
e
V p=$ 0.05

3.- Price the 230 day put and call options whit a strike price of $115 over a stock currently trading at
$113.47, which is expected to pay a dividend in 17 days time of $2.68 and another dividend in 198 days
of $3.15, that has a volatility of $46.50 pa, when the continuously compounded risk free rate is 0.75%.
What is the intrinsic value of these options?

4.- Price the 318 day put and call options with a strike price of $275 over a stock currently trading at
$287.38, which is expected to pay a dividend in 135 days of $6.72, that has a volatility of $38.50%pa,
when the continuously compounded risk free rate is 0.75%. What is the intrinsic value of these options?
5.- In dollars and points price the 120 day SPI 200 Index put and call options with a strike price of 6225
when the S&P/ASX 200 Index is currently trading at 6278 that has a volatility of 25%pa, which has a
dividend yield of 2.55% when the continuously compounded risk free rate is 0.75%. What is the intrinsic
value of these options?

6.-In dollars and points price the 1 day SPI 200 Index put and call options with a trike price of 6200 when
the S&P/ASX 200 Index is currently trading at 6202 that has a volatility of 10%pa, which has a dividend
yield of 4.25% when the continuously compounded risk free is 0.75%. What is the intrinsic value of these
options?

Information
X =6200−()=9,548
Po =6202=154,551.08
σ =0.1
σ 2=0.01
d 1=0.0425

e rt =1.0002
e rt =0.9999
t=¿ 0.002734
r =0.0075
Pod 1 =P o−De −rt

Pod 1 =9551−405.92(0.99)
Pod 1 =9149.21

Equations
 Po

d 1=
{[ ] (
¿
x
+ r+ σ 2 ) ∙t }
σ √t

9149.21

d 1=
{[
¿
9548 ]
+ ( 0.0075+0.5 (0.01) ) ∙ 0. 00034 }
0.1 √ 0. 002734

9149.21

d 1=
{[
n
9548 ]
+0.000034237 5 }
0. 05234
d 1=−0.824

N d 1=0.206 1

d 2=0.8772

N d 2=0 .1922

9548
V c D 1=9144.21−0.2061− ∙ 0.1922
1.0002
V c D 1=1844.62−1833.08

V c D 1=$ 9.53

I v =|9.53−9.144|

V 1=|9 134.37|
x
V p D 1=V c + −P o
ert
9.54 8
V p=9.53+ −9.548
1.0002
V p=$ 9.33

I v =|9.144−9. 33|

V 1=|9134.67|