Use a 4-step binomial tree to price an American put option with these financial parameters: S 0
Question:
Use a 4-step binomial tree to price an American put option with these financial parameters: S0 = 60, K = 60, r = 0.10, σ = 0.3, T = 90 days. Compare with the Black-Scholes price. What is the probability that the option ends ITM (by Monte Carlo calculation)?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
To price an American put option using a 4step binomial tree we need to follow these steps Calculate the up and down factors u and d using the followin...View the full answer
Answered By
Fahmin Arakkal
Tutoring and Contributing expert question and answers to teachers and students.
Primarily oversees the Heat and Mass Transfer contents presented on websites and blogs.
Responsible for Creating, Editing, Updating all contents related Chemical Engineering in
latex language
8+ Reviews
22+ Question Solved
Related Book For 
Question Posted:
