1. Figure graphs the value of a call option as a function of the value of the underlying stock. Graph the value of a call option (vertical axis) against
a) a, the instantaneous standard deviation of the returns on the underlying asset;
b) rf , the risk-free rate;
c) T, the time to maturity.
2. What are the conditions under which an American put would be exercised early on a stock that pays no dividends?
