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An option has a 40% (actuarial) chance of paying $5.14 when the underlying asset increases by 8.7% and a 60% (actuarial) chance of paying $9.13
An option has a 40% (actuarial) chance of paying $5.14 when the underlying asset increases by 8.7% and a 60% (actuarial) chance of paying $9.13 if the underlying asset declines by 14.5%. Given that the risk-free rate is 3.3% p.a. and there are 3 months until this option is to expire, what is the risk-neutral price of this option
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