Question
You are given the following information about Southwest Airlines (LUV) stock. The current stock price is $50. Southwest Airlines does not pay a dividend. The
You are given the following information about Southwest Airlines (LUV) stock.
The current stock price is $50.
Southwest Airlines does not pay a dividend.
The annual volatility of the stock price, , is 0.30.
The risk-free interest rate is 7.00%.
Using a 2 period binomial tree, evaluate the LUV American Style Put option premium with a strike price of $65 and 6 months until expiration.
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An Introduction to the Mathematics of financial Derivatives
Authors: Salih N. Neftci
2nd Edition
978-0125153928, 9780080478647, 125153929, 978-0123846822
