Suppose S = $100, K = $95, r = 8% (continuously compounded), t = 1, =

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Suppose S = $100, K = $95, r = 8% (continuously compounded), t = 1, σ = 30%, and δ = 5%. Explicitly construct an eight-period binomial tree using the Cox-Ross Rubinstein expressions for u and d:
d = e eoVh

Compute the prices of European and American calls and puts.

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Derivatives Markets

ISBN: 978-0321543080

4th edition

Authors: Rober L. Macdonald

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