Question
You are to price a 2-year 80-strike American put option on a futures contract using a binomial tree. You are given the following information: The
You are to price a 2-year 80-strike American put option on a futures contract using a binomial tree.
You are given the following information:
- The length of each time step is 1 year.
- The volatility of the futures price is 25%.
- The initial futures price is 70.
- The continuously compounded risk-free interest rate is 5%.
Calculate the price of the put option.
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International financial management
Authors: Jeff Madura
9th Edition
978-0324593495, 324568207, 324568193, 032459349X, 9780324568202, 9780324568196, 978-0324593471
