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Shares of Aditya Telecom are currently priced at $50 a share, and in one period, they will be worth either $45 or $55. Suppose that
Shares of Aditya Telecom are currently priced at $50 a share, and in one period, they will be worth either $45 or $55. Suppose that the probability that the share price will increase is 99% and the probability that it will decrease is 1%. Shares of United Technology are also currently priced at $50 a share, and in one period, they will be worth either $45 or $55. Suppose that the probability that the share price will increase is 1% and the probability that it will decrease is 99%. We have European call and put options on Aditya Telecom and United Technology with one period to expiration and an exercise price of $50. What is the relation between the binomial prices of the European call option on Aditya Telecom and the European call option on United Technology? What is the relation between the binomial prices of the European put option on Aditya Telecom and the European put option on United Technology? EXPLAIN
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