Using the Black Scholes model in the OptAll.xls spreadsheet, and the chosen company, carry out the following:
a) Calculate the volatility of the share price as the standard deviation of the percentage changes over the year 2016.
b) Prepare a table of 1-year call and put option quotes taking the
first entry in 2017 (02/01/17) and strike prices that are: at the money
(the spot) and 2%, 4% and 10% above and below the spot. Take the
risk-free rate as 1%.
c) Prepare a contingency table for an at the money call option using
the quote in part (b) with possible maturity prices of spot and 3% and
7% above and below the spot.
d) Construct a collar for a client who wishes to purchase the share
on 02/01/17 and have protection from a 4% decrease in the price of the
share over 2017.
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