Two actuaries, A and B, use a two-period binomial forward tree to compute the prices of a
Question:
Two actuaries, A and B, use a two-period binomial forward tree to compute the prices of a European call and a European put using different parameters.
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Describe the relationship between the call price computed by Actuary A and the put price computed by Actuary B.
Transcribed Image Text:
Actuary Option A Call B Put Underlying Strike Stock Price Price 200 190 190 200 Dividend Risk-free Stock Yield Interest Rate Volatility 5% 30% 3% 30% 3% 5% Option Maturity 1 1
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