股票与投资分析Chap016.docx

Chapter16-OptionValuation

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Chapter16

OptionValuation

Intrinsicvalue=S0–X=$55–$50=$5.00

Timevalue=C–Intrinsicvalue=$6.50–$5.00=$1.50

Usingput-callparity:Put=C–S0+PV(X)+PV(Dividends)

=$2.25–$33+$35/(1+.04)3/12+0=$3.91

Usingput-callparity:Put=C–S0+PV(X)+PV(Dividends)

$2.50=$3.00–S0+$75/(1+.08)+0?S0=$69.94

Putvaluesalsoincreaseasthevolatilityoftheunderlyingstockincreases.Weseethisfromtheparityrelationshipasfollows:

C=P+S0–PV(X)–PV(Dividends)

GivenavalueofSandarisk-freeinterestrate,ifCincreasesbecauseofanincreaseinvolatility,somustPinordertokeeptheparityequationinbalance.

Numericalexample:

Supposeyouhaveaputwithexerciseprice100,andthatthestockpricecantakeononeofthreevalues:90,100,110.Thepayofftotheputforeachstockpriceis:

Stockprice

90

100

110

Putvalue

10

0

0

Nowsupposethestockpricecantakeononeofthreealternatevaluesalsocenteredaround100,butwithlessvolatility:95,100,105.Thepayofftotheputforeachstockpriceis:

Stockprice

95

100

105

Putvalue

5

0

0

Thepayofftotheputinthelowvolatilityexamplehasone-halftheexpectedvalueofthepayoffinthehighvolatilityexample.

(1)PutAmustbewrittenonthelower-pricedstock.Otherwise,giventhelowervolatilityofstockA,putAwouldsellforlessthanputB.

(2)PutBmustbewrittenonthestockwithlowerprice.Thiswouldexplainitshighervalue.

(2)CallB.DespitethehigherpriceofstockB,callBischeaperthancallA.Thiscanbeexplainedbyalowertimetomaturity.