Using the data in the previous question, you are now asked to approximate the current value of a European call option on the stock St The option has a strike price of 100, and a maturity of 200 days (a) Determine an appropriate time interval , such that the binomial tree has 5 steps (b) What would ...

a We want to choose so that there are 5 evenly spaced time intervals Since there are 20 ...

Using the data in the previous question, you are now asked to approximate the current value of

Question:

Using the data in the previous question, you are now asked to approximate the current value of a European call option on the stock St. The option has a of 100, and a of 200 days.
(a) Determine an appropriate time interval ∆, such that the binomial tree has 5 steps.
(b) What would be the implied u and d?
(c) What is the implied "up" probability?
(d) Determine the tree for the stock price St.
(e) Determine the tree for the call premium Ct. Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...