1 % This function evaluates the arbitrage-free price of a European call 2 % option in the Binomial tree model 3 % INPUTS 4 % so : stock price at time 0 5 % u : up factor 6 % d : down factor 7 % T : number of periods 8 % r : interest rate (per period) 9 % K : strike price of the call % N :Number of time steps 10 % OUTPUT 11 % y : price of the call at time zero 12 13 %First Goal: Compute the time step (Delta T) %and tree parameter function y - priceCall (So,u,d,T,r, K) I p=1+r-d q (u-1-r)/ (u-d) 1 % This function evaluates the arbitrage-free price of a European call 2 % option in the Binomial tree model 3 % INPUTS 4 % so : stock price at time 0 5 % u : up factor 6 % d : down factor 7 % T : number of periods 8 % r : interest rate (per period) 9 % K : strike price of the call % N :Number of time steps 10 % OUTPUT 11 % y : price of the call at time zero 12 13 %First Goal: Compute the time step (Delta T) %and tree parameter function y - priceCall (So,u,d,T,r, K) I p=1+r-d q (u-1-r)/ (u-d)