(Difficult) The current price of a stock is $100. After one period, this stock may move to...
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(Difficult) The current price of a stock is $100. After one period, this stock may move to three possible values: {150, 110, 60}. The value of $1.00 invested in the risk-free asset compounds to a value of $1.05 in one period. Find the upper and lower bounds of the call price if its strike is $100.
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In options pricing we often calculate the bounds for European call options without dividends The bou...View the full answer
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