Question
The share price on 04/06/2021 of Pfizer Inc. was 38.97. A september 17 2021 call strike price is 30 with its last price 9.44 bid
The share price on 04/06/2021 of Pfizer Inc. was 38.97. A september 17 2021 call strike price is 30 with its last price 9.44 bid price 9.15 and ask price 9.40. similarly september 17 2021 put strike price is 30 with its last price 0.09 bid price 0.07 and ask price 0.11. Assume that over each of the next two 2-month periods to September 2021, the Pfizer share price is expected to go up by 10% or down by 10% each quarter. Assume the risk-free interest rate is 2% per annum with continuous compounding. Estimate the value of the 4-month European call option with the strike price chosen? Estimate the value of the 4-month European put option with a strike price chosen? Show the binomial tree in each case.
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