Same question as Problem 4 but use the exercise boundary method. Data given in Problem 4 Price

Question:

Same question as Problem 4 but use the exercise boundary method.

Data given in Problem 4

Price a 90 day 100 strike Bermudian option with 15 day early exercise periods. Assume r = 1 % and σ = 20 %. Use the binomial tree solution method. Plot the price of the option versus originating stock price. Compare the graph with that of its European counterpart.

Step by Step Answer:

Related Book For  book-img-for-question

Finance With Monte Carlo

ISBN: 9781461485100

2013th Edition

Authors: Ronald W. Shonkwiler

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