Repeat the previous problem calculating prices for American options instead of European What happens For a stock index, S $100, 30 , r 5 , 3 , and T 3 Let n 3 a What is the price of a European call option with a strike of $95 b What is the price of a European put option with a strike of $95 c Now l...

a The price of an American call option with a strike of 95 is 241650 b The ...

Repeat the previous problem calculating prices for American options instead of European. What happens? For a stock

Question:

Repeat the previous problem calculating prices for American options instead of European. What happens?
For a stock index, S = $100, σ = 30%, r = 5%, δ = 3%, and T = 3. Let n = 3.
a. What is the price of a European call option with a strike of $95?
b. What is the price of a European put option with a strike of $95?
c. Now let S = $95, K = $100, σ = 30%, r = 3%, and δ = 5%. (You have exchanged values for the stock price and and for the interest rate and yield.) Value both options again. What do you notice? 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...