Homework 8

Due November 3rd by 11:59 PM

Submit assignments as last_first_hw8.py

Homework Instructions:

The data for this assignment will be obtained from WRDS using the classroom login
Download daily stock data for NFLX from July 1st, 2016, to December 31st 2017.
Download option data from Option Metrics over the time period June 1st, 2017 to December
31st 2017 for a put and call for NFLX with a strike price of $150.00 and an expiration date of
the third Friday of December.
Download daily 1-year treasury bill rates from treasury.gov
1. Throughout the 6-month period of the option, calculate the Black-Scholes put and call
option prices (Using the standard formula) with the following inputs:
A.The rolling 6-month standard deviation as a measure of volatility,
B.The daily 1-year treasury bill as the risk-free rate
C.The daily price of NFLX as the spot price.
D.The time until expiration is the current date being estimated minus the
expiration date of the option.
2. Calculate the average price discrepancy for both the put and call options.
3. Plot the actual put price and the BS put price on a single graph, with time on the x-
axis and prices on the y-axis.
4. Plot the actual call price and the BS call price on a single graph.
5. Plot the call discrepancy, put discrepancy, and volatility measure on a single graph.

Grading Process

I will award points according the rubric in the syllabus. To determine whether the script
is correct and efficient, the program will be run on a separate stock-day file. The script, if
done correctly, will report accurate results for a random stock day file.
If you are unable to complete all the tasks above, at a minimum make sure your script can
run and produce some output. A script that doesn’t run receives the least amount of points.