Consider a forward start option which, 1year from today, will give its owner a 1

Question

Consider a forward start option which, 1year from today, will give its owner a 1-year European call option with a strike price equal to the stock price at that time (i.e. at the money). You are given:

1. The European call option is on a stock that pays no dividends.

2. The stock's volatility is 30%.

3. The forward price for delivery of 1 share of the stock 1 year from today is 100.

4. The continuously compounded risk-free interest rate is 8%.

Determine the price today of the forward start option.

Explanation / Answer

101.6748029 use black scholes model to arrive at this information is very less take alpha as .3 which is measure of stock volatility, there are lots of information which needs to be found out as strike price is not known you can put the values as formula is exhaustive and lenghty I request you to go to wikipedia or other math sites to understand the formula.It is not explainable as well.

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