9. Use a 3-step binomial model to price an American style put option with K =...
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9. Use a 3-step binomial model to price an American style put option with K = $175, S = $165,=0.85, r=0.002 and 8=0, with exactly 22 days to expiration (use days/365 for t). U a) Using a 3-step binomial tree, what are the up/down moves (u. d), and what is the d risk-neutral probability (p) of prices going higher each period? b) What is the value of the European put option (use the Black-Scholes model for this part)? c) What is the value of the option if it is American? P Euro Put Am Put h pv 1-p 9. Use a 3-step binomial model to price an American style put option with K = $175, S = $165,=0.85, r=0.002 and 8=0, with exactly 22 days to expiration (use days/365 for t). U a) Using a 3-step binomial tree, what are the up/down moves (u. d), and what is the d risk-neutral probability (p) of prices going higher each period? b) What is the value of the European put option (use the Black-Scholes model for this part)? c) What is the value of the option if it is American? P Euro Put Am Put h pv 1-p
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a Using a 3step binomial tree what are the updown moves u d and what is the riskneutral probability p of prices going higher each period The 3step bin... View the full answer
Related Book For
An Introduction to Derivative Securities Financial Markets and Risk Management
ISBN: 978-0393913071
1st edition
Authors: Robert A. Jarrow, Arkadev Chatterjee
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