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A call option with a time to maturity of nine months and an exercise price of $ 2 8 is written on a stock whose
A call option with a time to maturity of nine months and an exercise price of $ is
written on a stock whose current price is $ The stock distributes a dividend of
everyone quarter, and last one was distributed one month ago. The riskfree interest rate
is pacompounded continuously and the stock's volatility is pa
a Please use a fourstep binomial tree to estimate the option value and delta for both
the European and American cases. Note: please estimate delta using the next two
nodes as shown in class you only have to estimate the current delta, not for the
future nodes
b Now, assume instead that the third dividend distribution is Recalculate the
European and American call values and compare them. What can you conclude?
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