Question
A call option on a stock index is valued using a three-step binomial tree with an up move that equals 1.05 and a down move
A call option on a stock index is valued using a three-step binomial tree with an up move that equals 1.05 and a down move that equals 0.95. The probability of the up move and of the down move is both 50%. The current level of the index is $190, and the option exercise price is $200. If the option value is positive when the stock price exceeds the exercise price at expiration and $0 otherwise, calculate the number of terminal nodes with a positive payoff .
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Principles of Corporate Finance
Authors: Richard A. Brealey, Stewart C. Myers
7th edition
978-0072869460
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