If an ATM Call option with expiry in one year trades at 1% of its spot price (which is equal to the strike). What is the implied volatility of the option, assuming a zero interest rate and no dividends.

How would your answer (to the previous question) change if instead of having a strike equal to the spot and O interest rate, we assume an interest rate of “s” and we set the strike to the current spot times exp(r).

o answer does not change

o answer depends on the spot price

o answer depends on the interest rate

answer depends both on the spot and the interest rate. Get Finance homework help today