3. Consider an at-the-money option on a non-dividend-paying stock that follows a GBM. The current stock price is $80, th
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- 3 Consider An At The Money Option On A Non Dividend Paying Stock That Follows A Gbm The Current Stock Price Is 80 Th 1 (26.29 KiB) Viewed 20 times
3. Consider an at-the-money option on a non-dividend-paying stock that follows a GBM. The current stock price is $80, the continuously compounded risk-free interest rate is 12% per annum, the volatility is 28% per annum, and the time to maturity is one year. (a) What is the BSM-price of the option if it is a European call? (b) What is the BSM-price of the option if it is an American call? (c) What is the BSM-price of the option if it is a European put? (d) Use your answers in exercises (a) and (c) to verify that put-call parity holds.