Questions from Business Statistics

Q: ‘‘The price of an at-the-money European futures

‘‘The price of an at-the-money European futures call option always equals the price of a similar at-the-money European futures put option.’’ Explain why this statement is true.

Q: Suppose that a futures price is currently 30. The risk-

Suppose that a futures price is currently 30. The risk-free interest rate is 5% per annum. A three-month American futures call option with a strike price of 28 is worth 4. Calculate bounds for the pri...

Q: A trader sells a strangle by selling a 6-month European

A trader sells a strangle by selling a 6-month European call option with a strike price of $50 for $3 and selling a 6-month European put option with a strike price of $40 for $4. For what range of pri...

Q: Why are options on bond futures more actively traded than options on

Why are options on bond futures more actively traded than options on bonds?

Q: Trader A enters into a forward contract to buy an asset for

Trader A enters into a forward contract to buy an asset for $1,000 in one year. Trader B buys a call option to buy the asset for $1,000 in one year. The cost of the option is $100. What is the differe...

Q: Calculate the price of a three-month European call option on

Calculate the price of a three-month European call option on the spot value of silver. The three-month futures price is $12, the strike price is $13, the risk-free rate is 4% and the volatility of the...

Q: ‘‘A futures price is like a stock paying a dividend yield

‘‘A futures price is like a stock paying a dividend yield.’’ What is the dividend yield?

Q: A futures price is currently 50. At the end of six

A futures price is currently 50. At the end of six months it will be either 56 or 46. The risk-free interest rate is 6% per annum. What is the value of a six-month European call option on the futures...

Q: How does the put–call parity formula for a futures option

How does the put–call parity formula for a futures option differ from put–call parity for an option on a non-dividend-paying stock?

Q: Suppose you buy a put option contract on October gold futures with

Suppose you buy a put option contract on October gold futures with a strike price of $1,400 per ounce. Each contract is for the delivery of 100 ounces. What happens if you exercise when the October fu...