You use the following information to construct a binomial forward tree for modeling the price movements of
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You use the following information to construct a binomial forward tree for modeling the price movements of a nondividend-paying stock:
(i) The length of each period is 6 months.
(ii) The current stock price is 100.
(iii) The stock’s volatility is 20%.
(iv) The continuously compounded risk-free interest rate is 6%.
Calculate the price of a 1-year 105-strike shout put option on the stock.
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The forward tree parameters are Figure 861 U or d expr6h oh ex...View the full answer
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