Exam 13: Risk and the Pricing of Options

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When the exercise price of a call option is higher than the current price of the stock,the option is said to be:

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ABX corporation stock is currently trading for $37.60.A one-year European call option on ABX is currently trading for $7.23,and a one-year European put option on ABX with the same strike price is currently trading for $0.76.If the stock pays no dividends,and the risk-free rate is 3% per year,what is the strike price of the options?

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The Black-Scholes formula is notable because it does NOT require us to know:

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Standard stock options are traded and bought and sold through dealers only and cannot be bought via an exchange.

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You have shorted a call option on WSJ stock with a strike price of $50.The option will expire in exactly six months.If the stock is trading at $60 in three months,what will you owe for each share in the contract?

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You have shorted a call option on WSJ stock with a strike price of $50.The option will expire in exactly six months.If the stock is trading at $45 in three months,what will you owe for each share in the contract?

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Use the table for the questions below Consider the following information on options from the CBOE for Rackspace. Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to sell 20 call option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to sell 20 call option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to sell 20 call option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to sell 20 call option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is: -Assume you want to sell 20 call option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is:

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An investor purchases a call option and its underlying stock on the same day.If the stock appreciates by 25%,the call option will appreciate by:

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How many of the January 2009 put options are in-the-money?

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Use the table for the questions below Consider the following information on options from the CBOE for Rackspace. Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to sell 20 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to sell 20 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to sell 20 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to sell 20 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is: -Assume you want to sell 20 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is:

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When is an option out-the-money?

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________ is the relationship between the value of a stock,a bond,and call and put options on the same stock with the same exercise price.

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The price of a European call option on Lululemon stock with an exercise price of $34.50 and one year to expiry is trading at $2.52.The current price of the stock is $34,and the risk-free rate is 4%.With no arbitrage,what must be the price of a European put on Lululemon with an exercise price of $34.50?

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The ________ side of an options contract has the option to exercise,while the ________ side has an obligation to fulfill the contract.

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Suppose a stock is currently trading for $35,and in one period it will either increase to $38 or decrease to $33.If the one-period risk-free rate is 6%,what is the price of a European put option that expires in one period and has an exercise price of $36?

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A put option on a stock has an exercise price of $31.If the stock price at expiration is $33.40,what is the option payoff for a short put position?

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You pay $3.25 for a call option on Luther Industries that expires in three months with a strike price of $40.00.Three months later,at expiration,Luther Industries is trading at $41.00 per share.Your profit per share on this transaction is closest to:

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Debt holders can be thought as owning the firm but having ________ a call option on the assets of the firm with a strike price equal to ________.

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A call option on a stock has an exercise price of $22.25.If the stock price at expiration is $25,what is the option payoff for a long call position?

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A(n)________ in the volatility of assets of the firm benefits ________ at a cost to debt holders.

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