Question
Take $K=50, S=$52, the values of u=1.05 , d=0.95 , no dividends,r-hat = gross interest factor = 1.025 per binomial period as given - and
Take $K=50, S=$52, the values of u=1.05 , d=0.95 , no dividends,r-hat = gross interest factor = 1.025 per binomial period as given - and compute
a) the VALUE of the American Put today if the Option had 1 period to go
b) Its value as an American put with 2 periods to go.
c) Its value as a EUROPEAN put with 2 periods to go. What is the premium of the Amput over its European counterpart?
d) repeat all of the above, a, b, and c, but for American calls.
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b Its value as an American put with 2 periods to go To accurately value an American option one needs ...Get Instant Access to Expert-Tailored Solutions
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An Introduction to Derivative Securities Financial Markets and Risk Management
Authors: Robert A. Jarrow, Arkadev Chatterjee
1st edition
978-0393912937, 393912930, 393913074, 978-0393920949, 393920941, 978-0393913071
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