Question
Consider a call option on a stock selling for $30 per share with a $32 exercise price. The stock's standard deviation is 36% per year;
Consider a call option on a stock selling for $30 per share with a $32 exercise price. The stock's standard deviation is 36% per year; the option matures in 6 months; and the risk-free interest rate is 4% per year.
a) Find the risk neutral probability assuming 3 months for each step.
b) Find the call price
c) Find the put price?
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Financial Management Theory and Practice
Authors: Eugene Brigham, Michael Ehrhardt, Jerome Gessaroli, Richard Nason
2nd Canadian edition
176517308, 978-0176517304
