A Stock Has a Current Price of $100

question 15

Multiple Choice

A stock has a current price of $100. Assume a CRR-style jump-to-default model in which the volatility is 30%. Let the risk-neutral probability of default in three months be 10%. The 3-month risk-free rate is 2% in continuously-componded and annualized terms. What is the price of a three-month at-the-money put option on this stock in a one-period jump-to-default tree model?

• A) $7.22
• B) 7.72
• C) $11.82
• D) $13.42

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Definitions:

Communication Situation

The context or environment in which information is exchanged between communicators, including factors like medium, participants, and purpose.

Recipients

Individuals or entities that receive something, such as a message, email, award, or payment.

Indirect Approach

A communication strategy that aims to address issues or communicate messages in a more roundabout or subtle manner.

Hostile

An environment, situation, or behavior characterized by antagonism, unfriendliness, or opposition.