Consider a 3-month European put with strike price Rs. 62 and current stock price Rs 60. The life of option is 3 months in three-time steps of 1 month and in each time step the stock price either moves up or moves down. If the volatility is 24%, Calculate the option price on each node using Binomial option pricing model. Does the Binomial model give the same result as the Black-Sholes model for option prices

Answer rating: 100% (QA)

To calculate the option price on each node using the binomial option pricing model we can first calculate the up and down movements of the stock price ... View the full answer