Exercise 2

Calculate the European and American values for a knock-out put option where the put option is knocked out if the stock price rises to 130 or if the stock falls to 70. Use the binomial model with the following values,

S = 100;

T = 1 Year= 20%;

K=100; Rf= 3% 12 time steps

2% Dividend Yield

2) For the parameter values in Exercise 1, value a put and call option with strike equal to 100 using the analytic binomial model with 20, 50, and 100 steps. Show how put-call parity holds for each time step choice.

use python please