Problem:
Suppose that the futures price of a commodity is 500 cents, the strike price of a futures option is 550 cents, the risk-free rate of interest is 3%, the volatility of the futures price is 20%, and the time to maturity of the option is 9 months
Required:
Question 1: What is the price of the option if it is a European call?
Question 2: What is the price of the option if it is a European put?
Question 3: Verify that put-call parity holds
Question 4: What is the futures price for a futures style option if it is a call?
Question 5: What is the futures price for a futures style option if it is a put?
Note: Please answer in proper manner and show all computations.