Question
Suppose the S&P 500 futures price is 1000, = 30%; r = 5%; = 5%; T = 1, and n = 3 (n refers to
Suppose the S&P 500 futures price is 1000, = 30%; r = 5%; = 5%; T = 1, and n = 3 (n refers to the number of binomial periods).
[Explicit steps of calculation is required]
(a) What are the prices of European calls and puts for K = $1000? Why do you find the prices to be equal?
(b) What are the prices of American calls and puts for K = $1000?
(c) What are the time-0 replicating portfolios for the European call and put?
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Energy And Finance Sustainability In The Energy Industry
Authors: André Dorsman, Özgür Arslan-Ayaydin, Mehmet Baha Karan
1st Edition
3319322664, 978-3319322667
