A stock index currently stands at 300 and has a volatility of 20 The risk free interest rate is 8 and the dividend yield on the index is 3 Use a three step binomial tree to value a six month put option on the index with a strike price of 300 if it is (a) European (b) American ...

a The price is 1439 as indicated by the tree in Figure S151 Figure S151 T ...

A stock index currently stands at 300 and has a volatility of 20%. The risk-free interest rate

Question:

A stock index currently stands at 300 and has a volatility of 20%. The risk-free interest rate is 8% and the yield on the index is 3%. Use a three-step binomial tree to value a six-month put option on the index with a of 300 if it is
(a) European
(b) American?
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...