Call Option Price Short Paper

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Mathematics

Description

Overview: For this task, you will analyze the effect on a call option’s price that results from various financial factors.

Prompt:
First, review the module resources, especially Chapter 8 in your text. Then, address the following questions:

  • What effect does Stock Price have on a call option price?
  • What effect does Time expiration have on a call option price?
  • What effect does Risk-free rate have on a call option price?
  • What effect does Standard Deviation of Stock returns have on a call option price?


This is a short paper assignment.

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Explanation & Answer

Attached.

Running head: CALL OPTION PRICE

1

Call Option Price
Student’s Name
Professor’s Name
Course Title
Date

CALL OPTION PRICE

2
Call Option Price

Financial factors such as stock price, time to expiration, risk-free rate and Standard deviation
of stock returns impact call option price in different ways. There are three variables which determine
the effect of stock price on call option price. These variables are the underlying price, time and
volatility. In the underlying price, when stock price increases, call option value also increases to
imply the two factors are directly proportional. T...


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