Question: consider the binomial option pricing model when the stock price is permitted to progress two period into the future. the current stock price is $100.
consider the binomial option pricing model when the stock price is permitted to progress two period into the future. the current stock price is $100. the stock price evolves by either rising 50% or dropping 25% each period. the risk free interest rate for each period is 10%. Assume that a european call is written on this stock with exercise price X=$120 and expiration date at the end of period 2.
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