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(BSM) Handout 9 (Ch 13) - Option pricing: the Black-Scholes-Merton Model PRACTICE QUESTIONS WITH CORRECT ANSWERS 100% VERIFIED 2025
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(BSM) Handout 9 (Ch 13) - Option pricing: the Black-Scholes-Merton Model PRACTICE QUESTIONS WITH CORRECT ANSWERS 100% VERIFIED 2025 BSM MODEL EXAMPLE Suppose that observations on a stock price (in dollars) at the end of each of 15 consecutive weeks are as follows: - 30.2 - 32.0 - 31.1 - 30.1 - 30.2 - 30.3 - 30.6 - 33.0 - 32.9 - 33.0 - 33.5 - 33.5 - 33.7 - 33.5 - 33.2 Estimate the stock price volatility. - Correct Answer STEP 1: Define the continuously compounded return (ui) using: Σui = Σln(Si/Si-1) - ln(32.0/30.2) = 0.0579 --> ^2 = 0.0034 - ln(31.1/32.0) = -0.0285 --> ^2 = 0.0008 - ln(30.1/31.1) = -0.0327 --> ^2 = 0.0011 - ln(30.2/30.1) = 0.0033 --> ^2 = 0.0000 - ln(30.3/30.2) = 0.0033 --> ^2 = 0.0000
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bsm model example suppose that observations on a s
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volatility example if a stock price is 50 and its
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bsm model example the current stock price is 42
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implied volatility example current stock price is
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