Assume that the strike price is $100. The time to maturity Tis 2 months. Risk-free rate is 0.1, u= 1.21, d = 0.82. Price the European and American binary calls if the spot price differs from the strike by 0.01 using the 2-step binomial tree. 

Use monthly compounding 

Answer rating: 100% (QA)

To price the European and American binary calls we need to first construct a binomial tree with two ... View the full answer