Question
Financial Derivatives 1. A stock's price is $40. Over each of the next two three month periods it is expected to go up or down
Financial Derivatives
1. A stock's price is $40. Over each of the next two three month periods it is expected to go up or down by 20%. The risk free rate is 6% p.a.
a. What should be the current price of a 6-month European style put option with a strike price of $45?
b. What should be the current price of a 6-month American style put option with a strike price of $45?
c. What should be the current price of a 6-month European style call option with a strike price of $35?
d. What should be the current price of a 6-month American style call option with a strike price of $35?
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