Question
The price of a stock is $50, its volatility 30% and the risk-free rate 5% compounded continuously. The stock is expected to pay $2 dividend
The price of a stock is $50, its volatility 30% and the risk-free rate 5% compounded continuously. The stock is expected to pay $2 dividend in 3 months and another $2 dividend in 9 months.
a) find the price of a 12-month European call option with a strike price of $48 (use the BSM model.)
b) find the price of an American option with the same maturity and strike price
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Financial Markets and Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
5th edition
321280299, 321280296, 978-0321280299
