For a four-period binomial stock price model, you are given: (i) The length of each period is
Question:
For a four-period binomial stock price model, you are given:
(i) The length of each period is 3 months.
(ii) The current price of a nondividend-paying stock is 100.
(iii) u = 1.11.
(iv) d = 0.90.
(v) The continuously compounded risk-free interest rate is 8%.
Calculate the price of a “double-barrier” 80-strike 1-year European call option which gets knocked out if either the upper barrier of 120 or the lower barrier of 80 is crossed.
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