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Solution Library
Calculation of Probability of Put and Call Options Expire
Question
You have a stock trading at $100. The stock follows a lognormal distribution with drift of 20% and volatility of 40%. The risk free rate is 1%. What is the probability for a 4 – month 90 put expire in the money? Find (-d2). Compare the results. What is the risk-neutral probability for a 4-month 90 put to expire in the money? Find (-d2). Compare the results.
Summary
This question belongs to accounting and discusses about stock trading and to find the probability for a given time period put expire in the money.
Total word count: 171
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