Question
Consider a European call option on a share with value S=$10 at t=0, with strike price K=$15, and a CRR model with N=5 steps, u=1.25,
Consider a European call option on a share with value S=$10 at t=0, with strike price K=$15, and a CRR model with N=5 steps, u=1.25, d=0.8, and per-step return R=1.15.
Now assume also that T=1.6 years.
What is the premium of the call, C(0), using a Black-Scholes model?
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Advanced Financial Accounting
Authors: Richard Lewis, David Pendrill
7th Edition
0273658492, 978-0273658498
