medium · FRM Part 1 Valuation and Risk Models
A financial institution holds a European call option on a non-dividend-paying stock with a current price S =100. The strike price is K =100, the continuously compounded risk-free rate is r = 5%, and the volatility is σ = 20%.
If the time to expiration is T = 1 year, and given that d_1 = 0.35 and d_2 = 0.15 with N(d_1) = 0.6368 and N(d_2) = 0.5596, what is the Black-Scholes-Merton value of the call?
- $10.45
- $13.68
- $7.72
- $5.57
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