You have a stock in the three-period binomial model such that So = 4, S (H)...
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You have a stock in the three-period binomial model such that So = 4, S₁ (H) = 8, S₁ (T) = 2, and r = 0.25. Give the full value trees for each of the following derivative securities: 1. A 3-period strike-$6 European call. Use Cn instead of V₁ for the value of the call. 2. A 3-period strike-$6 European put. Use P₁ instead of Vn for the value of the put. 3. A 3-period forward contract with delivery price $6. Use Fn instead of V₁ for the value of the forward contract. 4. Verify that Fn = Cn - Pn in all states. Note that in all cases, the value you are calculating is the value to the individual in the long position (call holder, put holder, counterparty to receive delivery of stock for the forward contract). You have a stock in the three-period binomial model such that So = 4, S₁ (H) = 8, S₁ (T) = 2, and r = 0.25. Give the full value trees for each of the following derivative securities: 1. A 3-period strike-$6 European call. Use Cn instead of V₁ for the value of the call. 2. A 3-period strike-$6 European put. Use P₁ instead of Vn for the value of the put. 3. A 3-period forward contract with delivery price $6. Use Fn instead of V₁ for the value of the forward contract. 4. Verify that Fn = Cn - Pn in all states. Note that in all cases, the value you are calculating is the value to the individual in the long position (call holder, put holder, counterparty to receive delivery of stock for the forward contract).
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Answer rating: 100% (QA)
1 So 4 8 2 C 0 4 0 2 So 4 8 2 P 6 0 6 3 So 4 8 2 Fn 6 6 6 4 Verify ... View the full answer
Related Book For
Chemistry The Central Science
ISBN: 978-0321696724
12th edition
Authors: Theodore Brown, Eugene LeMay, Bruce Bursten, Catherine Murphy, Patrick Woodward
Posted Date:
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