Shares of Novotel: Options example
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Shares of Novotel will sell for either $150 or $80 three months later, with probabilities 0.60 and 0.40, respectively. A European call with an exercise price of $100 sells for $25 today, and an identical put sells for $8. Both options mature in three months. What is a price of a three-month zero-coupon bond with a face of $100?
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Solution Summary
The price of 2 call and 5 put is calculated for the Novotel example.
Solution Preview
Call and put payoffs:
150-100=50
Call <
0
...
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