Question

Repeat Problem 11.1, only assume that r = 0.08. What is the greatest strike price at which early exercise will occur? What condition related to put-call parity is satisfied at this strike price?
In Problem 11.1
Consider a one-period binomial model with h = 1, where S = $100, r = 0, σ = 30%, and δ = 0.08. Compute American call option prices for K = $70, $80, $90, and $100.


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  • CreatedAugust 12, 2015
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