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A futures price is currently 80 and its volatility is 20%. The risk-free interest rate is 10% per annum. (Consider using a 2-stage binomial tree
A futures price is currently 80 and its volatility is 20%. The risk-free interest rate is 10% per annum. (Consider using a 2-stage binomial tree for these questions.)
A) What is the value of a 6-month European call option on the futures with a strike price of 80?
B) If the call were American, would it ever be worth exercising early?
c) What is the value of an 80 strike, 6-month European put option on the futures?
D) If the put were American, would it ever be worth exercising early? What would its value be?
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