6. The current price of a non-dividend paying stock is $30. Use a two-step tree to value a European call option on the stock with
6. The current price of a non-dividend paying stock is $30. Use a two-step tree to value a European call option on the stock with a strike price of $30 that expires in 6 months. Each step is 3 months, the risk free rate is 5% per annum with continuous compounding. What is the option price when u = 1.15 and d = 0.85? Assume that the option is written on 100 shares of stock.
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Authors: Judith J. Baker, R.W. Baker, Neil R. Dworkin
5th Edition
1284118215, 978-1284118216
