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Sagot :
The holder of a European put option is given the right, but not the duty, to sell a securities at a defined price on or before a certain date.
Before we can move on and calculate the price of a European put option, we must first estimate the value of the underlying asset. In this case, the underlying investment is a stock with a share price of $30 and no dividends.
The striking price of the option refers to the price at which the option holder is allowed to sell the underlying securities. In this case, the share strike price is $29 per share.
The term "risk-free interest rate" refers to the rate of return on an investment with no danger of loss. The interest rate in this case at which there is no danger is 4%.
The volatility of the underlying security's price may be used to measure how much it fluctuates over time. The volatility in this situation is 20%.
The term "time to maturity" refers to the period of time until the option expires. In this case, it takes six months for anything to develop.
Using these considerations, we are able to arrive at the following conclusion regarding the pricing of the European put option:
In Europe, the cost of a put option is equal to 30 N (-0.45) minus 28.43 N. (-0.31) ,where N is the standard normal cumulative normal distribution function.
The price used to calculate the option's value is the price at which the holder of a European put option can sell the underlying asset. In this case, the price of the option will be $2.57.
The final answer is 30N(-0.45)-28.43N. (-0.31).
learn more about European put option at https://brainly.com/question/18722172
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