Question
A futures price is currently 70 , its volatility is $20 \%$ per annum, and the risk-free interest rate is $6 \%$ per annum. What is the valuc of a five-month European put on the futures with a strike price of 65 ?
Step 1
Since the option has a five-month expiration, we need to convert it to years. There are 12 months in a year, so five months is equal to $\frac{5}{12}$ years. Show more…
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