Question

Consider a four-month futures put option with a strike price of 50 when the risk-free interest rate is $10 \%$ per annum. The current futures price is 47 . What is a lower bound for the value of the futures option if it is (a) European and (b) American?

   Consider a four-month futures put option with a strike price of 50 when the risk-free interest rate is $10 \%$ per annum. The current futures price is 47 . What is a lower bound for the value of the futures option if it is (a) European and (b) American?
 
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Options, Futures, and Other Derivatives
Options, Futures, and Other Derivatives
John C. Hull 10th Edition
Chapter 18, Problem 11 ↓

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Step 1

The put-call parity states that the value of a put option plus the present value of the strike price is equal to the value of a call option plus the current futures price. Mathematically, the put-call parity relationship can be expressed as: Put Option Value +  Show more…

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Consider a four-month futures put option with a strike price of 50 when the risk-free interest rate is $10 \%$ per annum. The current futures price is 47 . What is a lower bound for the value of the futures option if it is (a) European and (b) American?
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