A TRADER WRITES THE FOLLOWING 1-YEAR EUROPEAN-STYLE BARRIER OPTION...
17.
A trader writes the following 1-year European-style barrier options as protection against large movements in
a non-dividend paying stock that is currently trading at EUR 40.96.
Option
Price (EUR)
Up-and-in barrier call, with barrier at EUR 45
3.52
Up-and-out barrier call, with barrier at EUR 45
1.24
Down-and-in barrier put, with barrier at EUR 35
2.00
Down-and-out barrier put, with barrier at EUR 35
1.01
All of the options have the same strike price. Assuming the risk-free rate is 2% per annum, what is the
common strike price of these options?
a.
EUR 39.00
b.
EUR 40.00
c.
EUR 41.00
d.
EUR 42.00
2015 Financial Risk Manager (FRM®) Practice Exam