Using historical data you chose (monthly and 20 years period) and assuming that the strike price K is lower than current stock price by 2 dollars and risk free rate is 2%, find the following.

Using historical data you chose (monthly and 20 years period) and assuming that the strike price K is lower than current stock price by 2 dollars and risk free rate is 2%, find the following.

The value of a 3-year call option price written on those stocks. First, you need to compute the parameters of Black-Sholes model (T,SIG, ER…, etc). (3 points)

Use Garman–Kohlhagen model to compute a 2-year currency option prices. Assume the foreign risk free rate is 3%. Assume K is lower than Spot price by 2%. (3 points).

Compute the price for a zero coupon bond with a maturity of 3 years using the Vasicek model. (2 points).

Calculate the gross rate of return for ups and downs (u and d) for the stock you chose. (2 points)

Compute the call option price with a maturity of 2 years written on a 3-year bond assuming K =990. (2 points).

Plot the yield curve for Vasicek model. (3 points)

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