Find the value of a European put option on futures if the futures price is 72,the exercise price is 70,the continuously compounded risk-free rate is 8.5 percent,the volatility is 0.38 and the time to expiration is three months.
A)6.30
B)12.90
C)4.34
D)2.00
E)none of the above

Question

Quizplus · Accepted Answer

The value of a European put option on futures can be calculated using the Black-Scholes formula for options on futures. Given the inputs, the calculated value of the put option is approximately 4.34.

Find the Value of a European Put Option on Futures