I am wondering if anyone can provide fully solutions to those problems. Thank you!

ww w. ox di a APM466 Midterm 1 - Feb 26, 2014 10-11 am All aids, including books, notes and calculating devices, are allowed Communication devices are not allowed Always justify your answers Question 1. (50%) A market has a stock S, that can be worth $2, $1 or $0.5 after one period of time. Interest rates are zero. If a call option with strike 1 has the same value as a put option with strike 1, find the current price of the stock, the call and the put. Do wn Question 2. (50%) lo ad e rI A stock S is valued at $16 today. At the end of every quarter, for the next year, it can D 25 go up or down by 50%, and interest rates are zero. 18 8 Find the price of a European put with strike price $16. Find the price of an American put with strike price $16. Determine the nodes where it is optimal to exercise the option early. A 2-down (put) swing option gives the option holder ($16 S)+ at the end of every quarter over the next year period (4 quarters altogether), and the option can be exercised twice although not both times at the end of the same quarter. Find the price It em of the option today, and determine the possible exercise times when each of the two ID option exercises will occur.5 1 92 0 www.oxdia.com Powered by TCPDF (www.tcpdf.org) .c om