Work the Bermuda option Problem 5 of Chapter 4 assuming prices follow a symmetric differential IG model,
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Work the Bermuda option Problem 5 of Chapter 4 assuming prices follow a symmetric differential IG model, use equation (6.39). Be sure to report your model’s parameters.
Data given in problem 5
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.
Data given in equation 6.39
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