1. Mark bought a call option ten days ago on a stock, the call expires at the end of the year and has a strike price of 50. John bought a call option on the same stock yesterday, the call also expires at the end of the year and has a strike price of 50. Today, who's option has a higher value, Mark's or John's?
2. knowing A ree pros ems, i i e op tons ave e same expzra ton me an same strike K. For the price of a bather option, the argument is the value of the bather. For example, Cw,..and.in(50) is the price of an up-and-in call option with a barrier of 50.
2. Which of the following is true? Where C is the value of a regular call option.
A. Cup-and-in(50) + Cup-and-out(50) = C B. Cup.and.i„(50) - Cup-and-out(50) = C
C. -C„p.„„d_in (50) C„p-and-out (50) = C D. -Cup.and-in(50) - Cup.and-out (50) = C
3. A portfolio consists of an up-and-in call with a barrier of 50 and an up-and-in call with a barrier of 60. Describe the payoff of the protfolio at time T by filling in the table.
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Up to time T
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Time T Payoff
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S did not hit 50
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S hit 50, but did not hit 60
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S hit 60
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4. An option has the following payoff at time T.
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Up to time T
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Time T Payoff
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S did not hit 50
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0
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S hit 50, but did not hit 60
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2(ST - Kr
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S hit 60
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(Sr - Kr
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What is the premium of this option in terms of Cup-a„d-out(50), Cup-and-out(60), or C?