Use DerivaGem to calculate the value of an American put option on a non-dividendpaying
Chapter 10, Problem 10.28(choose chapter or problem)
Use DerivaGem to calculate the value of an American put option on a non-dividendpaying stock when the stock price is $30, the strike price is $32, the risk-free rate is 5%, the volatility is 30%, and the time to maturity is 1.5 years. (Choose Binomial American for the option type and 50 time steps.) (a) What is the options intrinsic value? (b) What is the options time value? (c) What would a time value of zero indicate? What is the value of an option with zero time value? (d) Using a trial and error approach, calculate how low the stock price would have to be for the time value of the option to be zero.
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