14. FX European Option (Nonrecombining B-Tree)

Write a VBA program to determine the initial price of European-style options on the British pound in a nonrecombining binomial tree model based on the following data:

S(0) 5 $1.54; K 5 $1.54; T 5 1; r 5 8%; rf 5 6%; σ 5 30%; M 5 10 Create a function to calculate the option price using the Black
Scholes formula and compare. Now gradually increase the value of M and report the subsequent option prices. Use the value of u 5 eσ ffiffiffiffi

Δt p 1ðr2rf 2σ2=2ÞΔt and d 5 e2σ ffiffiffiffi

Δt p 1ðr2rf 2σ2=2ÞΔt