Exercise 1: Stock Price Bond Price

UN-11C
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Exercise 1
Up
Down
Initial stock price
Interest rate
Exercise price
40%
-20%
25
8%
30
Stock price
Bond price
35
<-- =$B$12*(1+B3)
25
1.08
<-- =$G$12*(1+$B$7)
1.08
<-- =$G$12*(1+$B$7)
1
20
<-- =$B$12*(1+B4)
<-- =MAX(D11-$B$8,0)
<-- =MAX(D13-$B$8,0)
Call option payoffs

???
The call replicating portfolio

Stock, A
0.3333 <-- =(D16-D18)/(D11-D13)
Bonds, B
-6.1728 <-- =(D18-D13*B21)/(1+B7)
Call price
2.1605 <-- =B21*B6+B22
UN-11C
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Exercise 2
Up
Down
Initial stock price
Interest rate
Exercise price
40%
-20%
25
8%
30
Stock price
Bond price
35
<-- =$B$12*(1+B3)
25
20
<-- =$B$12*(1+B4)
<-- =MAX(D11-$B$8,0)
Call option payoffs
<-- =MAX(D13-$B$8,0)

Stock, A
0.3333 <-- =(D16-D18)/(D11-D13)
Bonds, B
-6.1728 <-- =(D18-D13*B21)/(1+B7)
Call price
2.1605 <-- =B21*B6+B22
The put replicating portfolio
Stock, A
-0.6667 <-- =(I16-I18)/(D11-D13)
Bonds, B
21.6049 <-- =(I16-D11*B26)/(1+B7)
Put Price
4.9383 <-- =B26*B12+B27
0.0000
1.08
<-- =$G$12*(1+$B$7)
<-- =MAX($B$8-D11,0)
10
<-- =MAX($B$8-D13,0)
???
0
LHS-RHS
<-- =$G$12*(1+$B$7)
Put option payoffs
???
Verifying put-call parity

Call price
2.1605
PV(exercise)
27.77778
Stock price
25
Put price
4.9383
1.08
1
<-- =B23
<-- =B8/(1+B7)
<-- =B6
<-- =B28
UN-11C
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Exercise 3
Initial stock price

Interest rate
Put exercise price
30
6.67%
40
Stock price
Bond price
35
28
1.066667 <-- =$G$12*(1+$B$7)

1
20
1.066667 <-- =$G$12*(1+$B$7)

Put option payoffs
5
9.5000
20

Stock, A
-1.0000 <-- =(I17-I19)/(D12-D14)
Bonds, B
37.5000 <-- =(I17-D12*B22)/(1+B7)
Put price
9.5000 <-- =B22*B13+B23
UN-11C
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Exercise 4
Up
Down
Initial stock price
Interest rate
Exercise price
30%
-10%
50
6%
50
Stock price
Bond price
65
<-- =$B$12*(1+B3)
50
1.06
<-- =$G$12*(1+$B$7)
1.06
<-- =$G$12*(1+$B$7)
1
45
<-- =$B$12*(1+B4)
15
<-- =MAX(D11-$B$8,0)
<-- =MAX(D13-$B$8,0)
Call option payoffs

???

Stock, A
0.7500 <-- =(D16-D18)/(D11-D13)
Bonds, B
-31.8396 <-- =(D18-D13*B21)/(1+B7)
Call price
5.6604 <-- =B21*B6+B22
UN-11C
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21
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Exercise 5
Up
Down
Initial stock price
Interest rate
Exercise price
25%
-20%
60
5%
55
Stock price
Bond price
75
<-- =$B$12*(1+B3)
60
1.05
<-- =$G$12*(1+$B$7)
1.05
<-- =$G$12*(1+$B$7)
1
48
<-- =$B$12*(1+B4)
Put option payoffs
<-- =MAX($B$8-D11,0)
<-- =MAX($B$8-D13,0)
???
Stock, A
-0.2593 <-- =(I16-I18)/(D11-D13)
Bonds, B
18.5185 <-- =(I16-D11*B20)/(1+B7)
Put Price
2.9630 <-- =B20*B12+B21
UN-11H
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Exercise 6
Up
Down
30%
-10%
Initial stock price

Interest rate
Exercise price
66.85653
66.857
0.000
60
6%
70
Stock price
Bond price
101.40
1.1236
78
60
1.06
70.20
54
Date 0
Date 1
48.60
Date 2
Date 0
Call option price

<-- =MAX(E11-$B$8,0)
4.557
0.000
0.20
<-- =MAX(E13-$B$8,0)
6.857
0.075
Date 1
0.00
Date 2
<-- =MAX(E15-$B$8,0)
Date 0
0.00
<-- =MAX($B$8-$E$11,0)
0.00
<-- =MAX($B$8-$E$13,0)
21.40
Date 2
<-- =MAX($B$8-$E$15,0)
0.000
9.057
16.000
Date 1
0.00
12.113
American Put option price
Finding ???--1 for the call
1.1236
Date 2
0.00
11.962
Date 0
Date 1
European Put option price

31.40
Date 0
1.1236
1.06
Date 1
21.40
Date 2
UN-11H
A
37
38
39
40
41
42
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45
46
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50
51
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54
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57
58
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61
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65
66
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70
71
72
B
Stock price
F
Bond price
101.40
78
H
1.1236
1.06
70.20
1.1236
Call option price

31.40
???--1
0.20
Stock, A
1.0000 <-- =(D43-D45)/(D38-D40)
Bonds, B
-62.2998 <-- =(D45-B48*D40)/H38
Call price
11.9623 <-- =B48*B39+B49*F39

Stock price
Bond price
70.20
54
48.60
Call option price
0.20
???--1
0.00
Stock, A
0.0093 <-- =(D61-D63)/(D56-D58)
Bonds, B
-0.4005 <-- =(D63-B66*D58)/H56
Call price
0.0755 <-- =B66*B57+B67*F57
1.1236
1.06
1.1236
UN-11H
A
73
74
75
76
77
78
79
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101
102
103
104
105
106
107
108
B
Stock price
F
Bond price
78.00
60
H
1.0600
1
54.00
1.0600
Call option price

11.9623
???--1
0.0755
Stock, A
0.4953 <-- =(D79-D81)/(D74-D76)
Bonds, B
-25.1602 <-- =(D81-B84*D76)/H74
Call price
4.5568 <-- =B84*B75+B85*F75
PRICING THE PUT

Finding ???--1 for the put
Stock price
Bond price
101.40
78
1.1236
1.06
70.20
Put option price
0.00
???--1
0.00
Stock, A
0.0000 <-- =(D100-D102)/(D95-D97)
Bonds, B
0.0000 <-- =(D102-B105*D97)/H95
Put price
0.0000 <-- =B105*B96+B106*F96
1.1236
UN-11H
A
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144

Stock price
Bond price
70.20
54
1.1236
1.06
48.60
1.1236
Put option price

0.00
???--1
21.40
Stock, A
-0.9907 <-- =(D118-D120)/(D113-D115)
Bonds, B
61.8993 <-- =(D120-B123*D115)/H113
Put price
12.1132 <-- =B123*B114+B124*F114
Finding ???--0 for the American put

Stock price
Bond price
78.00
60
1.0600
1
54.00
Put option price
0.0000
???--1
16.0000
Stock, A
-0.6667 <-- =(D136-D138)/(D131-D133)
Bonds, B
49.0566 <-- =(D138-B141*D133)/H131
American Put price
9.0566 <-- =B141*B132+B142*F132
1.0600
UN-11H
A
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
Finding ???--0 for the European put

Stock price
Bond price
78.00
1.0600
1
54.00
Put option price
0.0000
???--1
12.1132
Stock, A
-0.5047 <-- =(D155-D157)/(D150-D152)
Bonds, B
37.1396 <-- =(D157-B160*D152)/H150
European Put price
6.8565 <-- =B160*B132+B161*F151
1.0600
UN-11H
A
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
UN-11H
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217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
UN-11H
L
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2
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5
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8
9
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11
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13
14
15
16
17
18
19 <-- =MAX($B$8-$E$11,0)
20
21 <-- =MAX($B$8-$E$13,0)
22
23 <-- =MAX($B$8-$E$15,0)
24
25
26
27
28
29
30
31
32
33
34
35
36
UN-11H
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Exercise 7 (a,b)
Up
Down
15%
-10%
Initial stock price

Interest rate
Exercise price
50
9%
60
Stock price
Bond price
66.13
1.1881
57.5
1.09
50
51.75
1.1881
45
Date 0
1.09
40.50
Date 2
Date 1
Date 0
Call option price
Date 1
1.1881
Date 2
Put option price

6.12
<-- =MAX(E11-$B$8,0)
0.00
4.271
1.817
2.978
0.00
<-- =MAX(E13-$B$8,0)
3.478
8.25
0.000
Date 0
10.046
0.00
Date 2
Date 1
<-- =MAX(E15-$B$8,0)
Date 0
Date 1

Stock price
Bond price
66.13
57.5
1.1881
1.09
51.75
Call option price
6.12
???--1
0.00
1.1881
19.50
Date 2
UN-11H
A
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72

Stock, A
0.4261 <-- =(D34-D36)/(D29-D31)
Bonds, B
-18.5590 <-- =(D36-B39*D31)/H29
Call price
4.2706 <-- =B39*B30+B40*F30

Stock price
Bond price
51.75
45
1.1881
1.09
40.50
1.1881
Call option price

0.00
???--1
0.00
Stock, A
0.0000 <-- =(D52-D54)/(D47-D49)
Bonds, B
0.0000 <-- =(D54-B57*D49)/H47
Call price
0.0000 <-- =B57*B48+B58*F48

Stock price
Bond price
57.50
50
1.0900
1
45.00
Call option price
4.2706
???--1
0.0000
1.0900
UN-11H
A
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108

Stock, A
0.3417 <-- =(D70-D72)/(D65-D67)
Bonds, B
-14.1049 <-- =(D72-B75*D67)/H65
Call price
2.9777 <-- =B75*B66+B76*F66
PRICING THE PUT

Stock price
Bond price
66.13
57.5
1.1881
1.09
51.75
1.1881
Put option price

0.00
???--1
8.25
Stock, A
-0.5739 <-- =(D89-D91)/(D84-D86)
Bonds, B
31.9418 <-- =(D91-B94*D86)/H84
Put price
1.8165 <-- =B94*B85+B95*F85

Stock price
Bond price
51.75
45
40.50
Put option price
8.25
???--1
1.1881
1.09
1.1881
UN-11H
A
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
D
19.50

Stock, A
-1.0000 <-- =(D107-D109)/(D102-D104)
Bonds, B
50.5008 <-- =(D109-B112*D104)/H102
Put price
10.0459 <-- =B112*B103+B113*F103

Stock price
Bond price
57.50
50
45.00
Put option price
1.8165
???--1
10.0459
Stock, A
-0.6583 <-- =(D125-D127)/(D120-D122)
Bonds, B
36.3959 <-- =(D127-B130*D122)/H120
Put price
3.4785 <-- =B130*B121+B131*F121
check put call parity

0
1.0900
1
1.0900
UN-11H
A
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
UN-11H
A
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
UN-11H
A
217
218
219
220
221
222
223
224
225
226
UN-11H
L
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19 <-- =MAX($B$8-E11,0)
20
21 <-- =MAX($B$8-E13,0)
22
23 <-- =MAX($B$8-E15,0)
24
25
26
27
28
29
30
31
32
33
34
35
36
UN-11H
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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33
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35
36
Exercise 7 (c,d)
Up
Down
15%
-10%
Initial stock price

Interest rate
Exercise price
50
9%
60
Stock price
Bond price
66.13
1.1881
57.5
1.09
50
51.75
1.1881
45
Date 0
1.09
40.50
Date 2
Date 1
Date 0
Call option price
Date 1
1.1881
Date 2
Put option price

6.12
<-- =MAX(E11-$B$8,0)
0.00
4.271
2.500
2.978
0.00
<-- =MAX(E13-$B$8,0)
5.046
8.25
0.000
Date 0
15.000
0.00
Date 2
Date 1
<-- =MAX(E15-$B$8,0)
Date 0
Date 1

Stock price
Bond price
66.13
57.5
1.1881
1.09
51.75
Call option price
6.12
???--1
0.00
1.1881
19.50
Date 2
UN-11H
A
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72

Stock, A
0.4261 <-- =(D34-D36)/(D29-D31)
Bonds, B
-18.5590 <-- =(D36-B39*D31)/H29
Call price
4.2706 <-- =B39*B30+B40*F30

Stock price
Bond price
51.75
45
1.1881
1.09
40.50
1.1881
Call option price

0.00
???--1
0.00
Stock, A
0.0000 <-- =(D52-D54)/(D47-D49)
Bonds, B
0.0000 <-- =(D54-B57*D49)/H47
Call price
0.0000 <-- =B57*B48+B58*F48

Stock price
Bond price
57.50
50
1.0900
1
45.00
Call option price
4.2706
???--1
0.0000
1.0900
UN-11H
A
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108

Stock, A
0.3417 <-- =(D70-D72)/(D65-D67)
Bonds, B
-14.1049 <-- =(D72-B75*D67)/H65
American Call price
2.9777 <-- =B75*B66+B76*F66

Bond price
66.13
57.5
1.1881
1.09
51.75
1.1881
Put option price

0.00
???--1
8.25
Stock, A
-0.5739 <-- =(D89-D91)/(D84-D86)
Bonds, B
31.9418 <-- =(D91-B94*D86)/H84
Put price
1.8165 <-- =B94*B85+B95*F85

Stock price
Bond price
51.75
45
Put option price

8.25
???--1
1.1881
1.09
40.50
Needs no calculation - Always the same as European (if no dividend)
PRICING THE PUT

Stock price
1.1881
UN-11H
A
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
D
19.50

Stock, A
-1.0000 <-- =(D107-D109)/(D102-D104)
Bonds, B
50.5008 <-- =(D109-B112*D104)/H102
Put price
10.0459 <-- =B112*B103+B113*F103

Stock price
Bond price
57.50
50
1.0900
1
45.00
Put option price
2.5000
???--1
15.0000
Stock, A
-1.0000 <-- =(D125-D127)/(D120-D122)
Bonds, B
55.0459 <-- =(D127-B130*D122)/H120
American Put price
5.0459 <-- =B130*B121+B131*F121
1.0900
UN-11H
A
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
UN-11H
A
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
UN-11H
A
217
218
219
220
221
222
223
224
225
226
UN-11H
L
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19 <-- =MAX($B$8-E11,0)
20
21 <-- =MAX($B$8-E13,0)
22
23 <-- =MAX($B$8-E15,0)
24
25
26
27
28
29
30
31
32
33
34
35
36
UN-11H
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Exercise 8 (a,b)
Up
Down
30%
-10%
Initial stock price

Interest rate
Exercise price
30
25%
60
Stock price
Bond price
50.70
1.5625
39
1.25
30
35.10
1.5625
27
Date 0
1.25
24.30
Date 2
Date 1
Date 0
Call option price
Date 1
1.5625
Date 2
Put option price

0.00
<-- =MAX(E11-$B$8,0)
9.30
0.000
9.000
0.000
0.00
<-- =MAX(E13-$B$8,0)
8.400
24.90
0.000
Date 0
21.000
0.00
Date 2
Date 1
<-- =MAX(E15-$B$8,0)
Date 0
Date 1

Stock price
Bond price
50.70
39
1.5625
1.25
35.10
Call option price
0.00
???--1
0.00
1.5625
35.70
Date 2
UN-11H
A
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72

Stock, A
0.0000 <-- =(D34-D36)/(D29-D31)
Bonds, B
0.0000 <-- =(D36-B39*D31)/H29
Call price
0.0000 <-- =B39*B30+B40*F30

Stock price
Bond price
35.10
27
1.5625
1.25
24.30
1.5625
Call option price

0.00
???--1
0.00
Stock, A
0.0000 <-- =(D52-D54)/(D47-D49)
Bonds, B
0.0000 <-- =(D54-B57*D49)/H47
Call price
0.0000 <-- =B57*B48+B58*F48

Stock price
Bond price
39.00
30
1.2500
1
27.00
Call option price
0.0000
???--1
0.0000
1.2500
UN-11H
A
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108

Stock, A
0.0000 <-- =(D70-D72)/(D65-D67)
Bonds, B
0.0000 <-- =(D72-B75*D67)/H65
Call price
0.0000 <-- =B75*B66+B76*F66
PRICING THE PUT

Stock price
Bond price
50.70
39
1.5625
1.25
35.10
1.5625
Put option price

9.30
???--1
24.90
Stock, A
-1.0000 <-- =(D89-D91)/(D84-D86)
Bonds, B
38.4000 <-- =(D91-B94*D86)/H84
Put price
9.0000 <-- =B94*B85+B95*F85

Stock price
Bond price
35.10
27
24.30
Put option price
24.90
???--1
1.5625
1.25
1.5625
UN-11H
A
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
D
35.70

Stock, A
-1.0000 <-- =(D107-D109)/(D102-D104)
Bonds, B
38.4000 <-- =(D109-B112*D104)/H102
Put price
21.0000 <-- =B112*B103+B113*F103

Stock price
Bond price
39.00
30
27.00
Put option price
9.0000
???--1
21.0000
Stock, A
-1.0000 <-- =(D125-D127)/(D120-D122)
Bonds, B
38.4000 <-- =(D127-B130*D122)/H120
Put price
8.4000 <-- =B130*B121+B131*F121
check put call parity

0
1.2500
1
1.2500
UN-11H
A
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
UN-11H
A
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
UN-11H
A
217
218
219
220
221
222
223
224
225
226
UN-11H
L
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19 <-- =MAX($B$8-E11,0)
20
21 <-- =MAX($B$8-E13,0)
22
23 <-- =MAX($B$8-E15,0)
24
25
26
27
28
29
30
31
32
33
34
35
36
UN-11H
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Exercise 8 c
Up
Down
30%
-10%
Initial stock price

Interest rate
Exercise price
30
25%
30
Stock price
Bond price
50.70
1.5625
39
1.25
30
35.10
1.5625
27
Date 0
1.25
24.30
Date 2
Date 1
Date 0
Date 1
1.5625
Date 2
Put option price

0.00
0.000
0.300
0.00
3.000
Date 0
Date 1
PRICING THE PUT

Stock price
Bond price
50.70
39
1.5625
1.25
35.10
Put option price
0.00
1.5625
5.70
Date 2
UN-11H
A
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
B
???--1
0.00
Stock, A
0.0000 <-- =(D36-D38)/(D31-D33)
Bonds, B
0.0000 <-- =(D38-B41*D33)/H31
Put price
0.0000 <-- =B41*B32+B42*F32

Stock price
Bond price
35.10
27
1.5625
1.25
24.30
1.5625
Put option price

0.00
???--1
5.70
Stock, A
-0.5278 <-- =(D54-D56)/(D49-D51)
Bonds, B
11.8560 <-- =(D56-B59*D51)/H49
Put price
0.5700 <-- =B59*B50+B60*F50

Stock price
Bond price
39.00
30
1.2500
1
27.00
Put option price
0.0000
1.2500
UN-11H
A
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
B
???--1
D
3.0000

Stock, A
-0.2500 <-- =(D72-D74)/(D67-D69)
Bonds, B
7.8000 <-- =(D74-B77*D69)/H67
American Put price
0.3000 <-- =B77*B68+B78*F68
UN-11H
A
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
UN-11H
A
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
UN-11H
L
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19 <-- =MAX($B$8-E11,0)
20
21 <-- =MAX($B$8-E13,0)
22
23 <-- =MAX($B$8-E15,0)
24
25
26
27
28
29
30
31
32
33
34
35
36
UN-11C
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Exercise 9
We first price a call option on S&P with exercise price of 1500. Denote by C
Then: BOBOW=10*(1+1.2/1500*C)
Up
Down
67%
-20%
Current S&P
Interest rate
Exercise price
1500
34% 5 years
1500
S&P price
Bond price
2500
<-- =$B$16*(1+B6)
1500
1200
<-- =$B$16*(1+B7)
1000
<-- =MAX(D15-$B$11,0)
<-- =MAX(D17-$B$11,0)
Call option payoffs

???

Stock, A
0.7692 <-- =(D20-D22)/(D15-D17)
Bonds, B
-689.7768 <-- =(D22-D17*B25)/(1+B10)
Call price
464.0694 <-- =B25*B9+B26
BOBOW price
13.7126
1.338226 <-- =$G$12*(1+$B$7)

1
1.338226 <-- =$G$12*(1+$B$7)
UN-11H
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Exercise 10
Up
Down
25%
-10%
Initial stock price

Interest rate
Date 1 Exercise price
Date 1 Exercise price
50
25%
55
60
Stock price
Bond price
78.13
62.5
1.25
50
56.25
45
Date 0
1.25
40.50
Date 2
Date 1
Date 0
Date 1
Call option price

18.13
<-- =MAX(E13-$B$9,0)
0.00
<-- =MAX(E15-$B$9,0)
0.00
Date 2
<-- =MAX(E17-$B$9,0)
14.500
11.600
0.000
Date 0
Date 1

Stock price
Bond price
78.13
62.5
1.5625
1.25
56.25
Call option price
18.13
1.5625
UN-11H
A
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
B
???--1
0.00
Stock, A
0.8286 <-- =(D36-D38)/(D31-D33)
Bonds, B
-29.8286 <-- =(D38-B41*D33)/H31
Call price
14.5000 <-- =B41*B32+B42*F32

Stock price
Bond price
56.25
45
1.5625
1.25
40.50
1.5625
Call option price

0.00
???--1
0.00
Stock, A
0.0000 <-- =(D54-D56)/(D49-D51)
Bonds, B
0.0000 <-- =(D56-B59*D51)/H49
Call price
0.0000 <-- =B59*B50+B60*F50

Stock price
Bond price
62.50
50
1.2500
1
45.00
Call option price
14.5000
1.2500
UN-11H
A
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
B
???--1
D
0.0000

Stock, A
0.8286 <-- =(D72-D74)/(D67-D69)
Bonds, B
-29.8286 <-- =(D74-B77*D69)/H67
Call price
11.6000 <-- =B77*B68+B78*F68
We will not exercise the option early
UN-11H
K
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
1.5625
1.5625
1.5625
Date 2
UN-11H
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Exercise 11
Up
Down
30%
-10%
Initial stock price

Interest rate
Exercise price
60
6%
70
Stock price
Bond price
101.40
1.1236
78
1.06
60
70.20
1.1236
54
Date 0
1.06
48.60
Date 2
Date 1
Date 0
Date 1

0.00
<-- =MAX($B$8-E11,0)
0.00
0.000
0.000
6.857
0.00
<-- =MAX($B$8-E13,0)
9.057
0.00
12.113
Date 0
1.1236
Date 2
16.000
21.40
Date 2
Date 1
<-- =MAX($B$8-E15,0)
Date 0
Date 1
PRICING THE PUT

Stock price
Bond price
101.40
78
1.1236
1.06
70.20
Put option price
0.00
1.1236
21.40
Date 2
UN-11H
A
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
B
???--1
0.00
Stock, A
0.0000 <-- =(D36-D38)/(D31-D33)
Bonds, B
0.0000 <-- =(D38-B41*D33)/H31
Put price
0.0000 <-- =B41*B32+B42*F32

Stock price
Bond price
70.20
54
1.1236
1.06
48.60
1.1236
Put option price

0.00
???--1
21.40
Stock, A
-0.9907 <-- =(D54-D56)/(D49-D51)
Bonds, B
61.8993 <-- =(D56-B59*D51)/H49
Put price
12.1132 <-- =B59*B50+B60*F50

Stock price
Bond price
78.00
60
1.0600
1
54.00
Put option price
0.0000
1.0600
UN-11H
A
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
B
???--1
16.0000
Stock, A
-0.6667 <-- =(D72-D74)/(D67-D69)
Bonds, B
49.0566 <-- =(D74-B77*D69)/H67
American Put price
9.0566 <-- =B77*B68+B78*F68

Stock price
Bond price
78.00
1.0600
1
54.00
Put option price
0.0000
???--1
12.1132
Stock, A
-0.5047 <-- =(D91-D93)/(D86-D88)
Bonds, B
37.1396 <-- =(D93-B96*D88)/H86
European Put price
6.8565 <-- =B96*B68+B97*F87
1.0600
UN-11H
A
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
UN-11H
A
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
UN-11H
L
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19 <-- =MAX($B$8-E11,0)
20
21 <-- =MAX($B$8-E13,0)
22
23 <-- =MAX($B$8-E15,0)
24
25
26
27
28
29
30
31
32
33
34
35
36
UN-11H
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Exercise 12
Up
Down
30%
-10%
Initial stock price

Interest rate
Exercise price
100
6%
110
Stock price
Bond price
166.00
1.1236
130
1.06
100
114.00
1.1236
90
Date 0
1.06
78.00
Date 2
Date 1
Date 0
Date 1
Call option price

56.00
<-- =MAX(E11-$B$8,0)
4.00
<-- =MAX(E13-$B$8,0)
0.00
Date 2
<-- =MAX(E15-$B$8,0)
26.226
10.929
1.824
Date 0
Date 1

Stock price
Bond price
166.00
130
1.1236
1.06
114.00
Call option price
56.00
???--1
4.00
1.1236
1.1236
Date 2
UN-11H
A
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72

Stock, A
1.0000 <-- =(D34-D36)/(D29-D31)
Bonds, B
-97.8996 <-- =(D36-B39*D31)/H29
Call price
26.2264 <-- =B39*B30+B40*F30

Stock price
Bond price
114.00
90
1.1236
1.06
78.00
1.1236
Call option price

4.00
???--1
0.00
Stock, A
0.1111 <-- =(D52-D54)/(D47-D49)
Bonds, B
-7.7133 <-- =(D54-B57*D49)/H47
Call price
1.8239 <-- =B57*B48+B58*F48

Stock price
Bond price
130.00
100
1.0600
1
90.00
Call option price
26.2264
???--1
1.8239
1.0600
UN-11H
A
73
74
75
76
77
78
79
80

Stock, A
0.6101 <-- =(D70-D72)/(D65-D67)
Bonds, B
-50.0771 <-- =(D72-B75*D67)/H65
Call price
10.9292 <-- =B75*B66+B76*F66
Lower than the option price @ the non dividend case: $11.392
UN-11H
A
1
Exercise 13
Fact 6 (Chapter 21):You might find it optimal to early-exercise an American put on a non-dividend paying stock
4 You may exercise the option early at date 1 state "-1":
3
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Up
Down
15%
-5%
Initial stock price

Interest rate
Exercise price
42
5%
45
Stock price
Bond price
55.55
1.1025
48.3
1.05
42
45.89
1.1025
39.9
Date 0
1.05
37.91
Date 2
Date 1
Date 0
Date 1

0.00
<-- =MAX($B$11-E14,0)
0.00
0.000
0.000
1.609
0.00
<-- =MAX($B$11-E16,0)
2.429
0.00
3.379
Date 0
1.1025
Date 2
5.100
7.10
Date 2
Date 1
<-- =MAX($B$11-E18,0)
Date 0
Date 1
PRICING THE PUT

Stock price
Bond price
55.55
1.1025
7.10
Date 2
UN-11H
A
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
B
48.3
F
1.05
45.89
H
1.1025
Put option price

0.00
???--1
0.00
Stock, A
0.0000 <-- =(D39-D41)/(D34-D36)
Bonds, B
0.0000 <-- =(D41-B44*D36)/H34
Put price
0.0000 <-- =B44*B35+B45*F35

Stock price
Bond price
45.89
39.9
1.1025
1.05
37.91
1.1025
Put option price

0.00
???--1
7.10
Stock, A
-0.8891 <-- =(D57-D59)/(D52-D54)
Bonds, B
37.0034 <-- =(D59-B62*D54)/H52
Put price
3.3786 <-- =B62*B53+B63*F53

Stock price
Bond price
48.30
1.0500
UN-11H
A
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
B
42
F
1
39.90
H
1.0500
Put option price

0.0000
???--1
5.1000
Stock, A
-0.6071 <-- =(D75-D77)/(D70-D72)
Bonds, B
27.9286 <-- =(D77-B80*D72)/H70
American Put price
2.4286 <-- =B80*B71+B81*F71

Stock price
Bond price
48.30
1.0500
1
39.90
Put option price
0.0000
???--1
3.3786
Stock, A
-0.4022 <-- =(D94-D96)/(D89-D91)
Bonds, B
18.5017 <-- =(D96-B99*D91)/H89
European Put price
1.6088 <-- =B99*B71+B100*F90
1.0500
UN-11H
A
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
UN-11H
A
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
UN-11H
L
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22 <-- =MAX($B$11-E14,0)
23
24 <-- =MAX($B$11-E16,0)
25
26 <-- =MAX($B$11-E18,0)
27
28
29
30
31
32
33
34

Exercise 1: Stock Price Bond Price

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Exercise 1: Stock Price Bond Price

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UN-11C

Call option payoffs

The call replicating portfolio

Call option payoffs

The call replicating portfolio

Put option payoffs

Verifying put-call parity

Initial stock price

1.066667 <-- =$G$12*(1+$B$7)

1.066667 <-- =$G$12*(1+$B$7)

The put replicating portfolio

Call option payoffs

The call replicating portfolio

Initial stock price

Call option price

American Put option price

Finding ???--1 for the call

European Put option price

Call option price

Finding ???--2 for the call

Finding ???--0 for the call

Call option price

PRICING THE PUT

Finding ???--2 for the put

Put option price

Finding ???--0 for the American put

Finding ???--0 for the European put

Initial stock price

Call option price

Put option price

Finding ???--1 for the call

The call replicating portfolio

Finding ???--2 for the call

Call option price

Finding ???--0 for the call

The call replicating portfolio

PRICING THE PUT

Put option price

Finding ???--2 for the put

The put replicating portfolio

Finding ???--0 for the put

check put call parity

Initial stock price

Call option price

Put option price

Finding ???--1 for the call

The call replicating portfolio

Finding ???--2 for the call

Call option price

Finding ???--0 for the call

The call replicating portfolio

Finding ???--1 for the put

Put option price

Finding ???--2 for the put

Put option price

Needs no calculation - Always the same as European (if no dividend)

PRICING THE PUT

The put replicating portfolio

Finding ???--0 for the put

Initial stock price

Call option price

Put option price

Finding ???--1 for the call