Assume S = $52.50,K = $55,σ = 0.20,r = 0.045,T - t = 130 days,div = 0.01,and a jump probability = 0.007.What is the value of a put option?

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Quizplus · Accepted Answer

The correct answer is A because the put option value is $3.63. The put option value is calculated using the Black-Scholes-Merton model with jump diffusion, which takes into account the possibility of a jump in the underlying asset price. The jump probability is 0.007, and the jump size is assumed to be normally distributed with a mean of 0 and a standard deviation of 0.10.