As a financial analyst at Citibank Derivative Trading desk, you have collected data for a power option. A power call option pays off (max(ST-X, 0))2 at time T, where ST is the stock price at time T and X is the exercise price. A stock price is currently $60. It is known that at the end of one year it will be either $66 or $54. The risk-free rate of interest with continuous compounding is 5% per annum. Calculate the value of a one year power call option with an exercise price of $60 ? What is the delta of the option What is the risk neutral probability of up move What is the value of the

As a financial analyst at Citibank Derivative Trading desk, you have collected data for a power option. A power call option pays off (max(ST-X, 0))2 at time T, where ST is the stock price at time T and X is the exercise price. A stock price is currently $60. It is known that at the end of one year it will be either $66 or $54. The risk-free rate of interest with continuous compounding is 5% per annum. Calculate the value of a one year power call option with an exercise price of $60 ? What is the delta of the option What is the risk neutral probability of up move What is the value of the option ? A Click Submit to complete this assessment. <

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