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11.19 A stock price is currently $30. During each 2-month period for the next 4 months it will increase by 8% or reduce by 10%.
11.19 A stock price is currently $30. During each 2-month period for the next 4 months it will increase by 8% or reduce by 10%. The rick-free interest rate is 5%. Use a two-step tree to calculate the value of a derivative that pays off , where is the stock price in 4 months. If the dericative is American-style, should it be exercised early?
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