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The current price of the stock of Bufflehead company is C$100. During each six-month period it will either rise by 10% or fall by 10%.
The current price of the stock of Bufflehead company is C$100. During each six-month period it will either rise by 10% or fall by 10%. The interest rate is 6% per annum compounded semi-annually.
a. Calculate the value of a one-year European put option on Bufflehead's stock with an exercise price of C$115.
b. Recalculate the value of the Bufflehead put option, assuming that it is an American option.
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