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A futures price is currently $$\$ 40$$. The risk-free interest rate is $5 \%$. Some news is expected tomorrow that will cause the volatility over the next 3 months to be either $10 \%$ or $30 \%$. There is a $60 \%$ chance of the first outcome and a $40 \%$ chance of the second outcome. Use DerivaGem to calculate a volatility smile for 3-month futures options.

   A futures price is currently $$\$ 40$$. The risk-free interest rate is $5 \%$. Some news is expected tomorrow that will cause the volatility over the next 3 months to be either $10 \%$ or $30 \%$. There is a $60 \%$ chance of the first outcome and a $40 \%$ chance of the second outcome. Use DerivaGem to calculate a volatility smile for 3-month futures options.

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Options, Futures, and Other Derivatives

Options, Futures, and Other Derivatives

John C. Hull 10th Edition

Chapter 20, Problem 21

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6 * 10%) + (0.4 * 30%) = 6% + 12% = 18% Show more…

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A futures price is currently $$\$ 40$$. The risk-free interest rate is $5 \%$. Some news is expected tomorrow that will cause the volatility over the next 3 months to be either $10 \%$ or $30 \%$. There is a $60 \%$ chance of the first outcome and a $40 \%$ chance of the second outcome. Use DerivaGem to calculate a volatility smile for 3-month futures options.

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