Compute the price of Asian arithmetic average price call option. The current price of the stock...
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Compute the price of Asian arithmetic average price call option. The current price of the stock index is S = 80. The continuously compounded interest rate is r = 0.03 per year. The continuous dividend yield rate is 8 = 0.02 per year. The volatility of the stock index is o = 0.50 per year. You will generate the binomial tree using the formulas for u and d. (u = (r-5)h+h^(1/2) and d = e(r-5]h-oh^(1/2)) The options expire at time T = 0.75. Your binomial tree should be built using n = 3 periods. The constant strike price for the second option is K = 75. Compute the price of Asian arithmetic average price call option. The current price of the stock index is S = 80. The continuously compounded interest rate is r = 0.03 per year. The continuous dividend yield rate is 8 = 0.02 per year. The volatility of the stock index is o = 0.50 per year. You will generate the binomial tree using the formulas for u and d. (u = (r-5)h+h^(1/2) and d = e(r-5]h-oh^(1/2)) The options expire at time T = 0.75. Your binomial tree should be built using n = 3 periods. The constant strike price for the second option is K = 75.
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To compute the price of an Asian arithmetic average price call option we can use a binomial tree model In this case well generate the binomial tree wi... View the full answer
Related Book For
An Introduction to Derivative Securities Financial Markets and Risk Management
ISBN: 978-0393913071
1st edition
Authors: Robert A. Jarrow, Arkadev Chatterjee
Posted Date:
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