Feedback for Voltas India limited is trading at $35 in the NYSE. The currently available call option has an exerciseprice of $40 which expires in 6 months and the put option for the same is trading at $10. Thecontinuously compounded risk-free rate is 5% and the annualised standard deviation of returns is15%. The company has pledged 5% of its stake for raising capital from the investors. This newsfurther deteriorated the credit ratings if the company thus increasing the flight of investors from theequity market. To counter any adverse outcome, the company has also entered into a swap with acounterparty with floating interest payments every 6 month. On the account of this turmoil, theannualized standard deviation of returns has changed to 16%. Calculate the value of put option usingBSM model.
Location: Section Test 4 – FMP