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Consider an arithmetic average price- 2-year-Asian call option with a strike price of $50. The current price of the underlying stock is 50. The volatility
Consider an arithmetic average price- 2-year-Asian call option with a strike price of $50. The current price of the underlying stock is 50. The volatility of the stock is 0.1414. Stock pays 1 percent dividend at a continuous rate. The continuously compounded risk-free rate of return is 2 percent. Calculate the option premium using a two period binomial tree.
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