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Can code this. Compare the convergence rates of the four methods below by doing the following: Use the Binomial Method to price a 6-month European
Can code this.
Compare the convergence rates of the four methods below by doing the following: Use the Binomial Method to price a 6-month European Call option with the following information: the risk-free interest rate is 5% per annum and the volatility is 24%/annum, the current stock price is $32 and the strike price is $30. Divide the time interval into n parts to estimate the price of this option. Use n = 10, 20, 40, 80, 100, 200, and 500 to estimate the price and draw them all in one graph, where the horizontal axis measures n, and the vertical one the price of the option. Use the binomial method in which u = 1/d, d = c - squareroot c^2 - 1, c = 1/2(e^r delta + e^(r + sigma^2)delta), p = e^r delta - d/u - d Use the binomial method in which u = e^r delta(1 + squareroot e^sigma^2 delta - 1), d = e^e delta(1 - squareroot e^sigma^2 delta - 1), p = 1/2 Use the binomial method in which u = e^(r digma^2/2)delta + sigma squareroot delta, d = e^(r sigma^2/2)delta - sigma squareroot delta, p = 1/2 Use the binomial method in which u = e^sigma squareroot delta, d = e^-sigma dquareroot delta, p = 1/2 + 1/2((r - sigma^2/2) squareroot delta/sigma) Outputs: Graphs: 4 plots in one .png file Compare the convergence rates of the four methods below by doing the following: Use the Binomial Method to price a 6-month European Call option with the following information: the risk-free interest rate is 5% per annum and the volatility is 24%/annum, the current stock price is $32 and the strike price is $30. Divide the time interval into n parts to estimate the price of this option. Use n = 10, 20, 40, 80, 100, 200, and 500 to estimate the price and draw them all in one graph, where the horizontal axis measures n, and the vertical one the price of the option. Use the binomial method in which u = 1/d, d = c - squareroot c^2 - 1, c = 1/2(e^r delta + e^(r + sigma^2)delta), p = e^r delta - d/u - d Use the binomial method in which u = e^r delta(1 + squareroot e^sigma^2 delta - 1), d = e^e delta(1 - squareroot e^sigma^2 delta - 1), p = 1/2 Use the binomial method in which u = e^(r digma^2/2)delta + sigma squareroot delta, d = e^(r sigma^2/2)delta - sigma squareroot delta, p = 1/2 Use the binomial method in which u = e^sigma squareroot delta, d = e^-sigma dquareroot delta, p = 1/2 + 1/2((r - sigma^2/2) squareroot delta/sigma) Outputs: Graphs: 4 plots in one .png file
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