# Question: Using the BinomCall and BinomPut functions compute the binomial approximations

Using the BinomCall and BinomPut functions, compute the binomial approximations for the options in Examples 12.1 and 12.2. Be sure to compute prices for

n = 8, 9, 10, 11, and 12. What do you observe about the behavior of the binomial approximation?

n = 8, 9, 10, 11, and 12. What do you observe about the behavior of the binomial approximation?

## Answer to relevant Questions

Let S = $100, K = $90, σ = 30%, r = 8%, δ = 5%, and T = 1. a. What is the Black-Scholes call price? b. Now price a put where S = $90, K = $100, σ = 30%, r = 5%, δ = 8%, and T = 1. c. What is the link between your answers ...Suppose XYZ is a non-dividend-paying stock. Suppose S = $100, σ = 40%, δ = 0, and r = 0.06. a. What is the price of a 105-strike call option with 1 year to expiration? b. What is the 1-year forward price for the stock? c. ...Repeat Problem 13.10 for a 365-day 40-strike put. Suppose you sell a 40-strike put with 91 days to expiration. What is delta? If the option is on 100 shares, what investment is required for a delta-hedged portfolio? What is your overnight profit if the stock price ...Examine the prices of up-and-out puts with strikes of $0.9 and $1.0 in Table 14.3. With barriers of $1 and $1.05, the 0.90-strike up-and-outs appear to have the same premium as the ordinary put. However, with a strike of 1.0 ...Post your question