A four step CoxRossRubinstein binomial tree is used to price a one year American put option on an index when the index level is 500, the strike price is 500, the dividend yield is 2 , the risk free rate is 5 , and the volatility is 25 per annum What is the option price, delta, gamma, and theta Expl...

The tree is shown in Figure S1812 the option price is 4127 Delta ga ...

A four-step CoxRossRubinstein binomial tree is used to price a one-year American put option on an index

Question:

A four-step Cox–Ross–Rubinstein binomial tree is used to price a one-year American put option on an index when the index level is 500, the is 500, the yield is 2%, the risk-free rate is 5%, and the volatility is 25% per annum. What is the option price, delta, gamma, and theta? Explain how you would calculate vega and rho.
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...