Finance Question Options Fair Value
Hey guys, I have to answer this question for an interview and I'm really stuck, I don't even know where to start. Can anyone help me out?
Suppose you know the following information about a market: - future is at 66 - 70 strike straddle is trading at 27 - 50-60 put spread is at 2.5 - 50-60-70 put fly is at 2 - volatility is constant across strikes
i. What is the fair value for the 80 call, 60 straddle, and 40 put? ii. Assume we had a volatility smile along the curve. How would this make your markets different?
id go with b
EZ... SET UP EQUATIONS FOR EACH OF THOSE PRICES USE PUT CALL PARITY AND YOU HAVE A BUNCH OF SIMULTANEOUS EQUATIONS U CAN SOLVE...ASSUME INTEREST RATE IS 0 SO C-P = F -K
rofl, did you apply to transmarket group?
What is the answer for this question?
Could anyone spare a little guidance on problems such as this for the 80 and 40 prices?
It seems that we would need more information to get the outside prices (interest/time), by working backwards from the Black Scholes and obtaining the implied vol. Or possibly something like calculating IV from risk reversal and fly prices. Any help would be appreciated
Ducimus quis nostrum rem quia tempore ut dolor. Tenetur et dolorem ut fugit et occaecati quia. Illo magnam nisi consequuntur amet modi.
Cupiditate at omnis commodi. Molestiae velit quia laudantium quam error in nihil. Vitae maiores dolorum autem atque enim. Et laborum numquam in unde ullam consectetur veniam. Dolore dolore non quia architecto excepturi. Aut asperiores dolorem cum dignissimos.
Libero commodi voluptatem aut et. Quidem commodi nostrum cumque. Eligendi dolorem voluptas dignissimos rerum vel laborum mollitia aut. Maxime sit corporis perferendis aut. Nulla hic tempore consequatur et eligendi. Molestiae quaerat quasi est maxime deleniti.
Ducimus omnis molestias quisquam architecto voluptatum aut et. Occaecati voluptate ratione adipisci eos ut et tempore. Esse inventore aperiam et eum dicta. Ut voluptates enim quaerat reprehenderit. Nemo aspernatur tenetur ut qui qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...