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Consider a European call option on a non - dividend - paying stock where the stock price is $ 3 3 , the strike price
Consider a European call option on a nondividendpaying stock where the stock price is $ the strike price is $ the riskfree rate is per annum, the volatility is per annum and the time to maturity is months.
a Calculate u and d for a onestep binomial tree.
b Value the option using a non arbitrage argument.
c Assume that the option is a put instead of a call. Value the option using the risk neutral approach.
d Verify that the European call and European put prices found in b and c satisfy the putcall parity.
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