Question
A stock index currently stands at 300 and has a volatility of 20% per year. The continuously compounded risk-free interest rate is 3% per year
A stock index currently stands at 300 and has a volatility of 20% per year. The continuously compounded risk-free interest rate is 3% per year and the dividend yield on the index is 8%. Use a TWO-STEP binomial tree to value a six-month American call option on the index with a strike price of 295. Show all calculations.
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Fundamentals of Multinational Finance
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman
5th edition
205989756, 978-0205989751
