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Price a European Call & Put and an American Put on a stock that is currently selling at $25 and has a volatility of 25%.
Price a European Call & Put and an American Put on a stock that is currently selling at $25 and has a volatility of 25%. The options all have a life of 7 months and a strike price of $26. Therisk freerate for all horizons up to 7-months is 3% per annum with continuous compounding. The stock will pay a dividend of $1 in 3 months from today. Price European Call & Put and American Call & Put using a 7-step binomial tree for each option.
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