Question: A stock price can take only two possible values for 1 period u=1.4 So $100 d=0.8 ST-$140 P probability of going up=0.6 ST-$80 (1-P)

A stock price can take only two possible values for 1 period

u=1.4 So $100 d=0.8 ST-$140 P probability of going up=0.6 ST-$80 (1-P) probability of going down=0.4 X=$110 T=2 period R 5% per period No dividend payment before the expiration date European style call option -83

A stock price can take only two possible values for 1 period u=1.4 So $100 d=0.8 ST-$140 P probability of going up=0.6 ST-$80 (1-P) probability of going down=0.4 X=$110 T=2 period R 5% per period No dividend payment before the expiration date European style call option -83

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