Computer Simulation Assignment Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Computer Simulation Assignment Case Solution

I have chosen the first option for simulating the common stock price with put options. The initial common stock price is $ 40 and the put option exercise price is $ 35. The risk free rate, volatility, probability of the increase in the stock price and the daily price change values have assumed to be 1%, 30%, 50% and $ 0.45 respectively. The time period in years is 0.25 since we are simulating the common stock prices for a period of 90 days only.

First of all, using the Rand() excel function, the random probabilities have been generated in the excel spreadsheet and based upon these random probabilities, the positive or negative price changes have been computed and the respective daily stock prices. The respective put prices have also been computed using the excel add in function of Bsput for valuing options. Then the trigger point has been identified if the common stock price reaches a level of $ 42.50. Next the price of the new put with a higher exercise price has been calculated and then the alternative price trajectory. The graphs have also been created for trajectory prices and daily stock prices....................

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