Pricing via Vega-vol graph

Quantitative Finance Level 2

The stock is trading at 50. For the 55 strike, suppose that we are given the graph of option's vega against volatility. The option has a volatility of 10.

What is the price of the 55 put?

5 5 ∫ 0 10 ν d v o l \int_0^{10} \nu \, d vol 5 + ∫ 0 5 ν d v o l 5 + \int_0^{5} \nu \, d vol 5 + ∫ 0 10 ν d v o l 5 + \int_0^{10} \nu \, d vol 10 + ∫ 0 5 ν d v o l 10 + \int_0^{5} \nu \, d vol 10 + ∫ 0 10 ν d v o l 10 + \int_0^{10} \nu \, d vol Not enough information

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Calvin Lin by Calvin Lin

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2 solutions

Dom Stafford
Sep 28, 2017

Intrinstic value of 5 plus area under graph for volatility value.

1 Helpful 0 Interesting 0 Brilliant 1 Confused
Ahmed Javed
Mar 18, 2019

Hi - Where is the graph? I cannot see it

0 Helpful 0 Interesting 0 Brilliant 0 Confused

I've edited the question to reflect that it's a theoretical question which doesn't rely on an explicit graph.

Calvin Lin Staff - 2 years, 2 months ago

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