Suppose S = $100, r = 8% per annum (continuously compounded), t = 1 year, ...

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Suppose S = $100, r = 8% per annum (continuously compounded), t = 1 year, σ = 30% per annum, and 8 = 5% per annum. Construct an eight-period binomial tree for the underlying stock using each of the following models a. Forward binomial tree b. Cox-Ross-Rubinstein binomial tree C. Lognormal tree Using the binomial trees you constructed, please compute the prices an American put struck at K=$95 and has 1 year to expiration. Please highlight early exercise locations on your trees. Suppose S = $100, r = 8% per annum (continuously compounded), t = 1 year, σ = 30% per annum, and 8 = 5% per annum. Construct an eight-period binomial tree for the underlying stock using each of the following models a. Forward binomial tree b. Cox-Ross-Rubinstein binomial tree C. Lognormal tree Using the binomial trees you constructed, please compute the prices an American put struck at K=$95 and has 1 year to expiration. Please highlight early exercise locations on your trees.

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Here are the binomial trees constructed using the given parameters and the American put prices compu... View the full answer