Previously, the emphasis was on obtaining information from clients. In this chapter, the emphasis was on preparing witnesses for trial. To properly prepare witnesses for trial, the paralegal needs to….
Calculate the value of a 1-year European call on ABC Inc. with strike F.
‘At-the-money-forward’ options The stock of ABC Inc. currently trades at $100 and does not pay any dividend. Analysts predict that the price may rise or fall by 10% every 6 months and that the risk-free rate will remain at 5% per annum for all maturities.
(a) Sketch a binomial tree for the evolution of the stock price over the next year.
(b) Calculate the 1-year forward price F of ABC Inc.’s stock.
(c) Calculate the value of a 1-year European call on ABC Inc. with strike F. What about a European put with identical characteristics (underlying, strike, maturity)?