Exam 21: Option Valuation

Use the two-state put option value in this problem.S_O = $100; X = $120; the two possibilities for S_T are $150 and $80.The range of P across the two states is _____ the hedge ratio is _______.

All the inputs in the Black-Scholes option pricing model are directly observable except

A portfolio consists of 800 shares of stock and 100 calls on that stock.If the hedge ratio for the call is 0.5.What would be the dollar change in the value of the portfolio in response to a $1 decline in the stock price

Portfolio A consists of 150 shares of stock and 300 calls on that stock.Portfolio B consists of 575 shares of stock.The call delta is 0.7.Which portfolio has a higher dollar exposure to a change in stock price

The intrinsic value of an at-the-money put option is equal to

Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to

A $1 decrease in a call option's exercise price would result in a(n) __________ in the call option's value of __________ one dollar.

If the hedge ratio for a stock call is 0.60, the hedge ratio for a put with the same expiration date and exercise price as the call would be

If the stock price decreases, the price of a put option on that stock __________ and that of a call option __________.

An American-style call option with six months to maturity has a strike price of $35.The underlying stock now sells for $43.The call premium is $12. If the option has delta of .5, what is its elasticity