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1.1. Create an Excel worksheet in which the user inputs S, Sd, Su, K, r and T. Check that the no-arbitrage condition (1.1) is satisfied.
1.1. Create an Excel worksheet in which the user inputs S, Sd, Su, K, r and T. Check that the no-arbitrage condition (1.1) is satisfied. Compute the value of a call option in each of the following ways: (a) Compute the delta and use (1.2). (b) Compute the state prices and use (1.5a). (c) Compute the risk-neutral probabilities and use (1.6a). (d) Compute the probabilities using the stock as numeraire and use (1.8a). Verify that all of these methods produce the same answer. 1.1. Create an Excel worksheet in which the user inputs S, Sd, Su, K, r and T. Check that the no-arbitrage condition (1.1) is satisfied. Compute the value of a call option in each of the following ways: (a) Compute the delta and use (1.2). (b) Compute the state prices and use (1.5a). (c) Compute the risk-neutral probabilities and use (1.6a). (d) Compute the probabilities using the stock as numeraire and use (1.8a). Verify that all of these methods produce the same
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