Business, 12.08.2020 06:01 stodd9503

The Black-Scholes option pricing model (OPM) was developed in 1973. The creation of the Black-Scholes OPM played a significant role in the rapid growth of options trading. Under the assumptions used by Fischer Black and Myron Scholes to derive the Black-Scholes model, if the option price is the price found using the Black-Scholes model, arbitrage opportunities will exist.
According to the Black—Scholes Option Pricing Model, if the current stock price, P, increases, the value of the call option will

Merry Melon Fruit Company has a current stock price of $20.00. A call option on this stock has an exercise price of $20.00 and 0.36 year to maturity. The variance of the stock price is 0.04, and the risk-free rate is 5%. You calculate d1 to be 0.21 and N(0.21) to be 0.5832. Therefore, d_2 will be 0.09 and N(0.09) will be 0.5359. Using the Black- Scholes option Pricing Model, what is the value of the option?

a. $1.137
b. $1.251
c. $1.308
d. $0.966

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The Black-Scholes option pricing model (OPM) was developed in 1973. The creation of the Black-Schole...

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