Question
Your boss asks you to analyze options for the S&P 500. Based on your analysis you believe the S&P 500 offers a dividend yield
Your boss asks you to analyze options for the S&P 500. Based on your analysis you believe the S&P 500 offers a dividend yield of 1.90% over the next year, has implied volatility of 18% per annum, and the current risk-free rate is 1.65% (all on a continuously compounded basis). The current spot price of the S&P 500 is 2,250. Using a one-period binomial tree method, what would be the price of a 3-month European call at a strike price of 2,200?
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Financial Reporting and Analysis
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
7th edition
1259722651, 978-1259722653
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