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Assignment 2
Submission Date by students:27/10/2022-11:59 PM
Place of Submission: Students Grade Centre via blackboard.
Marks: 10 Marks
Assignment Question(s):(Marks 10)
Q1.Explain each of the following concepts as they relate to call options.
a. Rho( 1 Mark)
b. Theta( 1 Mark)
c. Vega( 1 Mark)
Q2.Discuss the covered Call strategy and protective Put strategy? And describe their advantages and disadvantages?(3 Marks)
Q3. Consider a stock worth $35 that can go up or down by 15 percent per period. The risk-free rate is 10 percent. The exercise price of European call option is $35. Use one binomial period.
a. Determine the two possible stock prices for the next period. (1 Mark)
b. Determine the intrinsic values/values at expiration of a European call option. (1Mark)
c. Find the theoretical value/Price of the option today.(2 Mark)
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