11.16. Suppose S = $100, K = $95, r = 8% (continuously compounded), t = 1, =...

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11.16. Suppose S = $100, K = $95, r = 8% (continuously compounded), t = 1, = 30%, and 8 = 5%. Explicitly construct an 8-period binomial tree using the Cox-Ross-Rubinstein expressions for u and d: Un eh d=e-o Compute the prices of European and American calls and puts.

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Derivatives Markets

ISBN: 978-0321280305

2nd Edition

Authors: Robert L. McDonald

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