A stock price is 40 a six-month european call option on the, Ask an Expert

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A stock price is $40. A six-month European call option on the stock with a strike price of $30 has an implied volatility of 35%. A six-month Europcan call option on the stock with a strike price of $0 has an implied volatility of 28%. The six-month risk-free rate is 5% and no dividends are expected. Explain why the two implied volatilities are different. Use DerivaGem to calculate the prices of the two options. Use put-call parity to calculate the prices of six-month European put options with strike prices of $30 and S50. Use DerivaGem to calculate the implied volatilities of these two put options.

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Computer Engineering, Engineering

Category:- Computer Engineering
Reference No.:- M92216308

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