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Suppose that Stock XYZ is currently trading at $25 and does not pay any dividends. Using a binomial tree with two periods, we would like
Suppose that Stock XYZ is currently trading at $25 and does not pay any dividends. Using a binomial tree with two periods, we would like to price a European up-and-out call option written on this stock with a strike price of $20, barrier level of $25.1 and expiration date in one month. Assume that annual continuously compounded interest rate is 1% and the volatility of the stock is 40% per year. What is the value of the barrier option? O 1.96 2.14 0.76 O 1.58
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