Question
1. Consider the following binomial option model. Stock price is 100 dollars now. In 1 year it can go to 120 dollars or 80 dollars.
1. Consider the following binomial option model. Stock price is 100 dollars now. In 1 year it can go to 120 dollars or 80 dollars. Interest rate with annual compounding is 10 percent. What is the price of a 1 year call with strike 110.
2. What are the risk neutral probabilities in the model of problem 1 that give the same price.
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Fixed Income Securities Tools For Todays Markets
Authors: Bruce Tuckman, Angel Serrat
3rd Edition
0470891696, 978-0470891698
