Question: ABC stock price is $235. It will either increase or decrease 10% in month 1 and 15% in month 2. The monthly risk-free interest rate

ABC stock price is $235. It will either increase or decrease 10% in month 1 and 15% in month 2. The monthly risk-free interest rate is 5.5%:

 

Using the risk-neutral probability approach.Find the premium of a 2-month put option with strike price of $239.


Using the replicating portfolio approach. Find the premium of a 1-month call option with strike price of $240.

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