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1. Suppose two-period (years) ATM European up and in call options, whose underlying stock has current price of $100 with a degree of up movement
1. Suppose two-period (years) ATM European up and in call options, whose underlying stock has current price of $100 with a degree of up movement of 30% and down movement of 10% for each year. The risk-free annual rate is 10%. The knock in barrier B = $110 and Rebate = B-K. (1) Please find the premium of call. (2) if the knock in barrier B = $140, find the premium. (3) how do you feel that relationship between barriers and premiums for up and in call.
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