
Explanation:
The delta of a put option on a stock paying a dividend at rate q is given by:
delta_put = exp(βq * t) * [N(dβ) β 1]
Given:
Calculation: delta_put = exp(β0.035 * 1) * (0.5411 β 1) = exp(β0.035) * (β0.4589) = 0.9656 * (β0.4589) = β0.4431
Why other options are incorrect:
An options trader is applying the Black-Scholes-Merton option pricing model to estimate the delta of a long 1-year European put option on a dividend-paying stock. Relevant data is provided below:
What is the delta of the put option?
A
β0.5517
B
β0.5411
C
β0.4589
D
β0.4431
No comments yet.