Consider a non-dividend-paying stock whose current price is $100. Using a two-period binomial tree and assuming that
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Consider a non-dividend-paying stock whose current price is $100. Using a two-period binomial tree and assuming that the risk-free rate is 0.30% per month and that u =1.05 and
d = 0.95.
What is the current (i.e., time-0) price of a 2-month European call on the stock whose exercise price is $99? What is its price at the end of the first month (i.e., the start of the second month) in the up state? What is its price at the end of the first month in the down state.
Related Book For
An Introduction to Derivative Securities Financial Markets and Risk Management
ISBN: 978-0393913071
1st edition
Authors: Robert A. Jarrow, Arkadev Chatterjee
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