Dr Nick

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About Dr Nick

Levels Tought:
Elementary,Middle School,High School,College,University,PHD

Expertise:
Art & Design,Computer Science See all
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Teaching Since: May 2017
Last Sign in: 340 Weeks Ago, 1 Day Ago
Questions Answered: 19234
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Education

  • MBA (IT), PHD
    Kaplan University
    Apr-2009 - Mar-2014

Experience

  • Professor
    University of Santo Tomas
    Aug-2006 - Present

Category > Business & Finance Posted 15 Jul 2017 My Price 14.00

Stock price Risk-free rate

 

Your firm has a well-respected economic research staff. The staff members have been successful in developing econometric models that can predict macroeconomic variables with a surprisingly degree of accuracy. The economic research staff would like to know which variables to monitor if options are ultimately used by the firm. Write a 2–3 page document to Mr. Curtis explaining how the listed variables impact the prices of call options and what the associated theory is behind each relationship:

  1. Stock price
  2. Risk-free rate
  3. Exercise price
  4. Stock volatility

It is also important to recognize if put-call parity conditions are being met; if not, an arbitrage opportunity exists for the firm. In the following situation, identify whether or not an arbitrage opportunity exists if

  • The call price = $1.15.
  • Exercise price = $22.50.
  • Time to expiration = 60 days.
  • Put price = $0.55.
  • Annual interest rate = 12%.
  • The stock pays 0 dividends.

Answers

Dr Nick
(4)
Status NEW Posted 15 Jul 2017 12:07 PM My Price 14.00

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