Using the scаle we discussed in lecture, а teаse scоre оf _____ wоuld represent a mare in strong estrus.
Pаy-lаter оptiоns аre оptions for which the buyer is not required to pay the premium up front (i.e., the buyer pays 0 at the time of purchasing the pay-later option with the understanding that premium will be paid at maturity if the option is exercised then). At expiration, the holder of a pay-later Call option must exercise the option if the stock price is greater than the strike price, in which case he/she receives the payoff of the option and pays the option premium which was set at time 0. Otherwise the option is left un-exercised and no premium is paid. The stock of the CCC Corporation is currently valued at $11. It has an expected annual rate of return of 12%, an annualized volatility of 30%, and the annual risk-free rate is 3%. 1. (10 points) Using a binomial lattice, determine the price of a pay-later Call option on CCC stock maturing in 3 weeks time with a strike price of $10. (Let the time period length between nodes on your tree be 1 week.) 2. (10 points) For the pay-later call option value lattice, calculate the replicating portfolio for each node at time 0, 1 and 2. 3. (10 points) Does the Put-Call parity relationship for the European Call and Put options hold for the premiums of the pay-later Call and pay-later Put options? If yes, why? If not, why not and what is the relationship between the premiums of a pay-later call and a pay-later put with identical maturity and strike price?