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LIvE YOU have been hired by an options trading firm. Your first assignment is to...

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LIvE YOU have been hired by an options trading firm. Your first assignment is to analyze if S0-day volatility or a 120-day volatility is better as an input into Black-Scholes. Conduct the following analysis for SPY. Assume you are doing this analysis on March 6 , 2023. Assume a continuous compounded risk free rate of 5.0% p.a. also assume 255 trading days and 365 calendar days in a year. a. Calculate the volatility of the stock over the last 60 trading days and 120 trading days. b. Use your estimates to calculate the call prices for strike prices of 395,400,405,410, and 415 for April 2023 and January 2024 expiration. c. Compare your prices with the actual prices for the call options (average of Bid and Ask). d. Which is a better measure of volatility, 60 days or 120 days? e. Now use the actual prices (average of Bid and Ask) to calculate the implied volatility. f. Is the implied volatility closer to the 60 -day or 120 -day volatility

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