You have purchased a call option at Rs 7 and the

strike price is Rs 70, if the market price at the

maturity is 90 what is the profit you make?
Value of a Call= Max(S-k,0)
Value of a call=Max(90-70,0)
=20
The profit we will make is 20 minus Rs 7 = 13
You have sold a call option for a premium of Rs 10
strike price is Rs 50 on the maturity date the stock
is trading at 40 what is your profit?

The holder of the call will not excise, he will allow

the option to expire we can keep our Rs 10/-

You have purchased a put option on an stock at Rs 5

the strike price is Rs 70 and the current stock price
is Rs 40 what is your profit?

Value of the Put= Max(K-S,0)

Value of the Put= Max(70-40,0)
30
Our profit is Rs 30 minus Rs 5 = Rs 25
 Cc= 8.405
Current Price of the Underlying Asset So 50
Strike Price ( Excise Price of the Option) K 52 d1=
Annualized Standard Deviation (Volatility) σ 59%
Time to maturity T 0.5 d1=
Continously compounded risk free rate of return r 9% d2=
exponent e 2.72 N(D1)
N(D2)
Black Scholes Model

Pp= 8.117

Put Call Parity So +

50

58.12

Stock Price+PutPrice=PV of the S

 Cc= S0*N(D1)-Ke^-(in)N(D2)
29.41 minus 21.01 d1= LN(S/K) plus (r+ σ^2/2)T
σ * (T)^0.5
-0.04 plus 0.13 d2= d1- σ * (T)^0.5
0.42 Pp= Ke^-(in)*N(-D2)-SoN(-D1)
0.223 -d1= -0.223
-0.195 -d2= 0.195 Imbibed in the above partial differential equations
0.5882 N(-D1) 0.4118 are the properties of
0.4226 N(-D2) 0.5774 Marakov From the following data using the B/S option
Stochasic Movement of Variables pricing model value the Call option
28.706 minus 20.59 Martingale. S 50
all from Quantative finance. K 52
i 9%
Pp = Ke^-(in) + Cc Variance 35%
8.117 49.71 plus 8.405 Time 0.5
d1= -0.04 plus
58.12 -d1=-.2229 0.22 0.42
-d2=.195349 d2= -0.2
Stock Price+PutPrice=PV of the Strike Price+CostofCall 0.41 N(-D1) N(D1)= 0.5882
0.58 N(-D2) N(D2)= 0.4226
Cc= S0*N(D1)-Ke^-(in)N(D2)

8.41 29.41 minus

ng the B/S option

0.13

21.01
 206.91 Cc= 278.99 minus 72.08
S 450 Cc= S0*N(D1)-Ke^-(in)N(D2)
K 375 d1= LN(S/K)plus (r+ σ^2/2)T
i 9% σ * (T)^0.5
Variance 6% d2= d1- σ * (T)^0.5
n 7 Pp= Ke^-(in)*N(-D2)-SoN(-D1)
Compute the Cc and Pp and Prove the Put Call Parity.
-43.37
D1= 0.31 0.18 plus 0.02
N(D1)= 0.62 0.66
-D1 -0.31 0.38
D2= -0.36 -D2 0.36 0.64
N(D2)= 0.36
So + Pp = Ke^-(in) + Cc
450 (43.37) = 199.72 plus 206.91

406.63 406.63

S 75 Compute the Cc and Pp using B/S option Pricing Model

K 85 Prove the Put Call Parity Relationship.
i 7%
e 2.72 Cc= SND1-Ke^-in*ND2
Variance 0.45 6.83
t 0.25 -0.15 d1= ln(S/K)+(r+v/2)t -5.141314295400600%
stddev * t^.5 0.34

-0.49 d2= d1- stddev*t^.5

N(D1) 0.44
N(D2) 0.31 Pp= Ke^-in*(-ND2)-S(-ND1)
15.35
-d1 0.15
-d2 0.49 So+Pp=Ke^-in+Cc
N(-D1) 0.56 90.35 83.53 plus 6.83
N(-D2) 0.69 90.35