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Consider an American put option with a strike of $9.50, a spot price of $10, volatility of 20% p.a, time to maturity of 3 months

Consider an American put option with a strike of $9.50, a spot price of $10, volatility of 20% p.a, time to maturity of 3 months and a dividend that is paid at 5% of the stock value in 2 months. Use a three period binomial model to price the option (assuming the ex-div drop off occurs at t=2 months)

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McMillan On Options

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