You use the following information to construct a binomial forward tree for modeling the price movements of

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You use the following information to construct a binomial forward tree for modeling the price movements of a nondividend-paying stock:

(i) The length of each period is 6 months.

(ii) The current stock price is 80.

(iii) The stock’s volatility is 30%.

(iv) The continuously compounded risk-free interest rate is 8%.

Calculate the price of a 1-year at-the-money geometric average price Asian European call option on the stock, with the average calculated based on ending 6-month stock prices (not including the initial stock price).

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Derivative Pricing

ISBN: 9780367734213

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Authors: Ambrose Lo

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Question Posted: Nov 24, 2023 10:31 PM

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You use the following information to construct a binomial forward tree for modeling the price movements of

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Derivative Pricing

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