Questions from Business Statistics

Q: Use a three-time-step binomial tree to value a

Use a three-time-step binomial tree to value a 9-month American call option on wheat futures. The current futures price is 400 cents, the strike price is 420 cents, the risk-free rate is 6%, and the v...

Q: A 3-month American call option on a stock has a

A 3-month American call option on a stock has a strike price of $20. The stock price is $20, the risk-free rate is 3% per annum, and the volatility is 25% per annum. A dividend of $2 is expected in 1....

Q: A 1-year American put option on a non-dividend

A 1-year American put option on a non-dividend-paying stock has an exercise price of $18. The current stock price is $20, the risk-free interest rate is 15% per annum, and the volatility of the stock...

Q: A 2-month American put option on a stock index has

A 2-month American put option on a stock index has an exercise price of 480. The current level of the index is 484, the risk-free interest rate is 10% per annum, the dividend yield on the index is 3%...

Q: How can the control variate approach improve the estimate of the delta

How can the control variate approach improve the estimate of the delta of an American option when the tree approach is used?

Q: How do equations (21.27) to (21.

How do equations (21.27) to (21.30) change when the implicit finite difference method is being used to evaluate an American call option on a currency?

Q: Suppose that Monte Carlo simulation is being used to evaluate a European

Suppose that Monte Carlo simulation is being used to evaluate a European call option on a non-dividend-paying stock when the volatility is stochastic. How could the control variate and antithetic vari...

Q: The spot price of copper is $0.60 per pound

The spot price of copper is $0.60 per pound. Suppose that the futures prices (dollars per pound) are as follows: 3 months……………….. 0.59 6 months………………… 0.57 9 months ………………..0.54 12 months ………………0.50 T...

Q: Calculate the price of a 3-month American put option on

Calculate the price of a 3-month American put option on a non-dividend-paying stock when the stock price is $60, the strike price is $60, the risk-free interest rate is 10% perannum, and the volatilit...

Q: Use the binomial tree in Problem 21.19 to value a

Use the binomial tree in Problem 21.19 to value a security that pays off in 1 year where x is the price of copper. Binomial tree in Problem 21.19: