(a) Price the call option of Problem 7 under the assumption that the volatility increases by 10...

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(a) Price the call option of Problem 7 under the assumption that the volatility increases by 10 % each week.

(b) Same question under the assumption the volatility decreases by 10 % each week.

Data in Problem 7

Use a 4-step binomial tree to price a call option with these particulars: S₀ = 36, K = 34, r = 0.02, σ = 0.3, T = 4 weeks (28 days).

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Finance With Monte Carlo

ISBN: 9781461485100

2013th Edition

Authors: Ronald W. Shonkwiler

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Question Posted: Oct 03, 2023 06:25 AM

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(a) Use a 4-step binomial tree to price a call option with these particulars: S 0 = 36, K = 34, r = 0.02, = 0.3, T = 4 weeks (28 days). (b) What is the Black-Scholes price? What is the probability...
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(a) Price the call option of Problem 7 under the assumption that the volatility increases by 10...

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