Question
Option pricing is an important subject in the field of financial investment. Suppose the current price of a stock is $100 per share. Research shows
Option pricing is an important subject in the field of financial investment. Suppose the current price of a stock is $100 per share. Research shows that the spot price will move either up by 8% or down by 4% each period. Use the Binomial Option Pricing model to determine the price of a call option with a strike price of $110 and an expiration date of THREE periods. The risk-free rate is 3% and no dividend will be paid within the three periods.
Build the call premium tree. Answers need to keep at least four decimal points, e.g., 2.5876.
| C0 = | C1u = | C2uu = | C3uuu = |
| C3uud = | |||
| C2ud = | |||
| C1d = | C3udd = | ||
| C2dd = | |||
| C3ddd = |
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Elementary Statistics
Authors: Robert R. Johnson, Patricia J. Kuby
11th Edition
978-053873350, 9781133169321, 538733500, 1133169325, 978-0538733502
