Investors are convinced that, next year, the price of a stoc…

Investors are convinced that, next year, the price of a stock will either go up or down; they disagree on the volatility of the price. The current spot price is $64.25 and volatility will either be high or low. If volatility is high, the price will either increase or decrease by $14.00. If volatility is low, the price will either increase or decrease by $3.00. If the increase or decrease in the price can occur with equal probability, how much more is an at-the-money put expected to (gross) payoff when volatility is high rather than low?

Given the following stock prices over six consecutive days:…

Given the following stock prices over six consecutive days: Day 1: $90 Day 2: $92 Day 3: $91 Day 4: $95 Day 5: $97 Day 6: $100 Calculate the population standard deviation of the log-returns of the stock prices. (Recall, option traders assume 252 daily in a year.)

Given the following information, what is the net payoff of a…

Given the following information, what is the net payoff of a synthetic long forward at expiration? Strike price of call and put: $120 Stock price at expiration: $125 Premium paid for call: $6 Premium received for put: $5 Recall, a synthetic long forward is a long position in a call and a short position in an otherwise identical put.