Question
Current stock price is $50; volatility is 40%; risk-free rate is 5%. We have an American style put option expires in 6 months. Its strike
Current stock price is $50; volatility is 40%; risk-free rate is 5%. We have an American style put option expires in 6 months. Its strike price is the maximum price over the life of the option; this means: its payoff in 6 months is max(0, Smax ST). No dividend payments during the 6 months. Use a 2-step CRR binomial model to price this option.
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Introduction To Derivatives And Risk Management
Authors: Don M. Chance, Robert Brooks
10th Edition
130510496X, 978-1305104969
