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