The current price of a non-dividend-paying stock is $99.75 and the annual standard deviation of the rate of return on the stock is 60%. A European put option on the stock has a strike price of $90 and expires in 0.25 years. The risk-free rate is 3% (continuously compounded).
Part 1
What is the value of the term d1 in the Black-Scholes formula?
Part 2
What is the value of N(d1)?
Part 3
What should be the price (premium) of the put option?
Part 4
What is the put's current hedge ratio (delta)?