Question
A stock is currently priced at $100. Over each of the next two three month periods it is expected to increase by 10% or fall
A stock is currently priced at $100. Over each of the next two three month periods it is expected to increase by 10% or fall by 10%. Consider a six month call option with a strike of $95. The risk free rate is 8% per annum.
What is the risk neutral probability p?
What is the call price?
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Risk Management And Financial Institutions
Authors: John Hull
1st Edition
0132397900, 9780132397902
